The Consumer Financial Protection Bureau’s annual report on residential mortgage lending activity and trends found that in 2022, overall mortgage lending fell, and closing costs, denials for insufficient income and interest rose.
In 2022, borrowers paid 22% more ($5,954) in costs and fees than they did the previous year. More borrowers also paid discount points, with the average borrower paying $2,370 in 2021. This is an over 18% increase in the number of borrowers who paid them.
During the reporting period, the number of refinances dropped from 8.3 million in 2021 to 2.2 million in 2022. The majority of these refinances were cash-out refinances which originated by independent lenders. Cash-out refinances typically have higher interest rates and payments, increasing the risk of foreclosure.
The only form of refinancing that increased from 2021 was home-equity lines of credit. Approximately 1.27 million home-equity lines of credit were offered in 2022, the majority of which were from depository institutions. These typically have lower interest rates, monthly payments and risk of foreclosure than cash-out refinances.
Additionally, CFPB found that average monthly mortgage payments increased by more than 46%. For a conventional conforming 30-year fixed-rate mortgage (excluding taxes and insurance), the average monthly payment rose from $1,400 in 2021 to $2,045 in 2022. At the end of 2022, the median interest rate for the same mortgage was 6.5%.
The analysis also found that Hispanic and Black borrowers were denied loans at higher rates, received smaller loans, were charged higher interest rates and paid more money in upfront fees than white and Asian borrowers. The median interest rate in 2022 was over 5% for Hispanic and Black borrowers but under 5% for their white and Asian counterparts.
Lastly, CFPB reported that lenders across the board denied more loan applications due to insufficient income than they had at any point since data was first collected in 2018. Insufficient income was the reason for mortgage denials for more than 50% of Asian applicants, 45% of Hispanic and Black applicants and 40% for white applicants. In 2018, this data for all four groups fell below 40%.
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