Top 25 lenders increased market share in 2021: HMDA

The top 25 lenders had a 43.9% market share in 2021, compared to 38.9% in 2020, rising yearly since 2018

A perfect lending storm spurred by the pandemic resulted in an absolutely stunning year for the mortgage industry in 2020. Top lenders who were able to quickly build capacity and take advantage of near-zero interest rates were rewarded with an increase in market share. Those trends largely continued in 2021, even though refi business slowed and jumbo purchase mortgages grew in prominence, according to an analysis of Home Mortgage Disclosure Act data published by the Consumer Financial Protection Bureau on Monday.

The top 25 lenders grew to 43.9% overall market share in 2021, up from 38.9% in 2020, the CFPB report found. That total has been rising every year since 2018, with specialist nonbank mortgage lenders gaining prominence as depository lenders pull back.

The annual HMDA report collected data from 4,472 financial institutions. The consumer watchdog noted that the rate of annual growth in originations for 2021 slowed to 2.4% from 66.8% the prior year. Cash-out refis continued to increase in 2021, with borrowers taking advantage of surging home prices and record levels of home equity.

In terms of demographics, in a more competitive marketplace, minority borrowers grew in their share of total loans closed. But affordability issues persisted.

Black borrowers’ share of home purchase loans increased to 7.9% in 2021, compared to 7.3% in 2020. Hispanic white borrowers slightly increased their share from 9.1% to 9.2%, and the share for Asians rose from 5.5% to 7.1%. The share for non-Hispanic whites declined from 59.1% in 2020 to 55.6% in 2021.

More Black borrowers took advantage of refinancings in 2021 than they had in 2020, increasing from share increased from 4.2% to 5.4% in 2021. Hispanic white borrowers’ share rose from 5.3% to 6.1%. Both groups returned to 2019 levels after a low in 2020, according to the CFPB. For Asians, the refi share declined from 6.7% to 6%. Meanwhile, non-Hispanic whites’ share fell from 61% in 2020 to 58.3% in 2021.

How lenders can improve business models in 2022

As 2022 proves to be a challenging year for the housing market, lenders are looking to take advantage of market downtime by improving their internal processes. HousingWire recently spoke with James Deitch, CEO of Teraverde, about the changes lenders can make to their business models in order to remain profitable.

Presented by: Teraverde

“Black and Hispanic white borrowers continued to have lower median loan amounts, lower median credit scores, and higher denial rates, in addition to paying higher median interest rates and total loan costs compared to non-Hispanic white and Asian borrowers,” the report said.

In 2021, the median amount for home purchase loans was $414,000 for Asian borrowers, $274,000 for non-Hispanic white borrowers, $272,000 for Hispanic white borrowers, and $264,000 for Black borrowers.

The median credit score in home purchase loans was 764 for Asian borrowers, 750 for non-Hispanic white borrowers, 716 for Hispanic white borrowers and 691 for Black borrowers. 

Interest rates also varied by race – in 2021, Black and Hispanic white borrowers paid, on average, 3.125% for home purchase loans, compared to 3% among non-Hispanic white borrowers and 2.875% for Asian borrowers.

The data includes closed-end (excluding reverse mortgage) home purchase first-lien mortgages secured by site-built one-to-four-family, principal-residence properties.

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