The 2009 HMDA Data: The Mortgage Market in a Time of Low Interest Rates and Economic Distress

Article excerpt

Data made available annually pursuant to the Home Mortgage Disclosure Act of 1975 (HMDA) provide an opportunity to explore changes in mortgage market activity along a host of dimensions. (1) HMDA requires most mortgage lending institutions with offices in metropolitan areas to publicly disclose information about their home-lending activity each year. The data include the disposition of each application for mortgage credit; the type, purpose, lien status, and characteristics of the home mortgages that lenders originate or purchase during the calendar year; loan pricing information; the census-tract designation of the properties related to these loans; personal demographic and other information about the borrowers; and information about loan sales. (2) The disclosures are used to help the public determine whether institutions are adequately serving their communities' housing finance needs, to facilitate enforcement of the nation's fair lending laws, and to inform investment in both the public and private sectors. The data have also proven to be valuable as a research tool, providing insights in many fields of interest.

The Federal Reserve Board currently implements the provisions of HMDA through regulation. (3) The Federal Financial Institutions Examination Council (FFIEC) is responsible for collecting the HMDA data and facilitating public access to the information. (4) In September, the FFIEC releases summary tables pertaining to lending activity from the previous calendar year for each reporting lender and aggregations of home-lending activity for each metropolitan statistical area (MSA) and for the nation as a whole. (5) The FFIEC also makes available to the public an application-level data file containing virtually all of the reported information for each lending institution. (6)

The 2009 HMDA data consist of information reported by more than 8,100 home lenders, including the nation's largest mortgage originators, and thus are broadly representative of all such lending in the United States. The regulations that implement HMDA have been essentially unchanged since 2002, with one notable exception. The rules related to the reporting of pricing data under HMDA were revised in 2008. The new procedures affect whether or not a loan is classified as higher priced starting with applications taken on October 1, 2009. Thus, the 2009 HMDA data reflect two different loan pricing classification rules, although, for the majority of the year and for most loans originated in 2009, the older rules applied. The effects of the rule change on reported higher-priced lending are explored in some depth in this article.

SUMMARY OF FINDINGS

This article offers a summary and preliminary analysis of the 2009 HMDA data. The results of our analysis reveal the following about mortgage lending in 2009:

* After substantial declines in loan volume in 2007 and 2008, overall loan volume rebounded in 2009, though it remained well below the levels observed in the middle of the decade. This increase obscures divergent trends. While refinance activity increased sharply, likely as a result of historically low interest rates, home-purchase lending continued to decline in 2009.

* The increase in refinancing activity in 2009 appears to have been somewhat subdued compared with what has historically been observed when mortgage rates sharply decline. Evidence presented in this article suggests that the more muted growth stems from several factors, including economic distress and low or negative equity among many households that could have benefited from lower rates.

* The decline in home-purchase lending could have been more dramatic were it not for first-time homebuyers. Those homebuyers benefited not only from certain market conditions such as historically low interest rates and falling house prices, but also from a federal tax credit of $8,000 and the fact that they did not need to sell a house in a depressed economic environment. …