A deep dive into the newest HMDA data will take months. In the meantime, though, credit unions can draw on our early analysis to identify trends already visible in the data. Here are some quick takeaways:
Market has hit its low point
The market appears to have bottomed out. Looking at historical HMDA data, we can see that lows routinely follow peaks such as those seen in 2020. Credit unions lenders can take heart, though; it is unlikely that loan origination units and dollars will drop any further. Our opportunity forecast shows that both are likely to begin increasing again in 2025.
Focus on home equity
Under HMDA reporting rules, home-equity loans are assigned a purpose of “home improvement” when the funds will be used for home repairs or additions. When the funds will be used to pay off debts or make purchases unrelated to home improvement, the purpose is “other.”
Both categories have gained ground as a percentage of all loans originated. Credit unions are close behind banks as leading providers in these loan areas. Struggling loan officers may want to consider pivoting to take advantage of this increased opportunity.
Credit unions are gaining refi ground, but still trail in purchase loans
Credit unions have gained ground in the refi space, owning 19% of originations compared to merely 14% in 2022. However, IMBs still lead originations of both purchase and refi loans by a significant margin.
We also took a look at the top 30 lenders of purchase loans. The only credit union in the top 30 is Navy Federal Credit Union, and only six banks made the cut. The remaining 23 spots are held by IMBs, reinforcing their strength in the market.
Withdrawals are up among minority and LMI borrowers
Though denial rates have remained flat, withdrawal rates have increased significantly. Minority and low- to middle-income (LMI) borrowers are experiencing an all-time high in fall-out rates, with many withdrawing their loan applications before an approval or denial decision is made. Since 2018, fall-out rates have jumped from 28.5% to 33.7%, with Black borrowers experiencing the highest withdrawal numbers at 43.3%. LMI borrowers aren’t far behind with a fall-out rate of 40.2%.
Forward-thinking credit unions may want to examine the causes of the widespread withdrawal rates and consider how to bolster these underserved members of their communities.
Growth in Hispanic markets
At a glance, HMDA presents a clear growth market for forward-looking credit union LOs. Originations and purchase dollars have increased among minority borrowers, particularly in Black and Hispanic households. Hispanic borrowers especially represent an ever-growing share of the market.
If you want more HMDA data insights read our full-length blog here, or watch the full presentation of our recent HMDA findings.
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About iEmergent: iEmergent is a data and analytics technology provider focused on delivering insights to help organizations navigate the industry’s changing landscape. iEmergent provides powerful market intelligence to credit unions of all types and sizes. Organizations use Mortgage MarketSmart, a web-based visualization tool, to access, analyze, and share data to shape strategy and make intelligent decisions. For more information, visit www.iEmergent.com.