As we enter the fourth quarter of the year and businesses begin forming their strategies for 2020, they need the most up-to-date consumer data to inform their strategies and match their clients’ needs. For financial institutions, there is no better source than the CFPB’s annual HMDA release.

Here are some of the major takeaways from the release.

New Data Categories Mean New Opportunities

The biggest change that financial institutions will see, and likely what many submitters were looking forward to, is the increase in data categories.

These categories provide breakdowns of complex information that previously were only available internally or within regulatory agencies with supervisory authority, but now are more broadly available.

The new data categories include debt-to-income ratio, term length, combined loan-to-value ratio, property value, rate period, delivery channel (e.g., submitted to third party), and pricing points and fees. This means financial institutions have far more insightful data to create mortgage products that will create greater appeal to families and businesses.

Decrease in Secondary Mortgage Market Activity

Although the total number of originated mortgages reported increased from 7.3 million in 2017 to 7.7 million in 2018, the secondary mortgage market where financial institutions sell to each other saw a decrease in activity.

Government organizations and government-sponsored enterprises like Fannie Mae, Ginnie Mae, Freddie Mac, and Farmer Mac significantly lowered their loan purchases. Fannie Mae, in particular, saw a 13% drop, from 1,842,055 to 1,604,749.

Meanwhile, portfolio investments rose from 2.4 million in 2017 to almost 3.3 million in 2018. As a result, the share of originated and purchased loans that were not sold rose from 25.7% to 33.7% between 2017 and 2018.

Growth of Second Lien Loans

Here’s another area of substantial change in the data. Mortgages with “first lien” status have increased, but this increase is small when compared to the skyrocketing “subordinate lien” category. The number of such originations increased from 250,000 to 1.12 million, a 359% increase.

This increase can mostly be ascribed to required reporting in 2018 of:

1) Consumer-purpose lines of credit for those institutions who are above the 500 annual originations threshold, and

2) Closed-end dwelling-secured consumer loans where the purpose is not home purchase, home improvement, or refinancing (e.g., educational expenses).

See what our solutions can do for you

HMDA data releases are always an exciting time for financial institutions because they provide them the necessary information to craft their annual and quarterly strategies. Ensure financial compliance and minimize redlining risk by contacting ComplianceTech today at info@ or visiting our website.