How much borrowing costs soared in 2023: CFPB

Buyers were far less active in the mortgage market in 2023 but paid steeper prices for their loans. 

Total median loan costs, including origination fees and discount points, for purchases rose 12.3% annually to $6,684 last year according to the Consumer Financial Protection Bureau. Its 2023 Mortgage Market Activity and Trends Report also found median total refinance costs soaring to $7,329 in 2023 from $4,979 in 2022.

In addition, more borrowers paid discount points last year than any other year it's been tracked in Home Mortgage DIsclosure Act data. Homebuyers used discount points in 56.6% of transactions, for a median sum of $3,000 that was up 26.6% yearly. Refinancers used discount points in two-thirds of transactions and spent a median sum of $3,902, a 35.6% annual increase. 

The 98-page report detailed mortgage data for 2023, a year beset by soaring interest rates, growing home prices and simmering inflation. Home shoppers walked away from the market as mortgage applications and originations both fell by around a third from the year prior. 

The perfect storm of unaffordability kept average monthly mortgage payments, excluding taxes and insurance, above $2000. The average payment for a conventional, conforming 30-year fixed-rate mortgage was $2,295 in December 2023, a 12.2% jump from the same time a year prior. 

Mortgage insurance premiums then of 175 basis points weighed heavily on Federal Housing Administration-backed loans, with borrowers paying a median $11,368 in total loan costs. Department of Veterans Affairs-backed mortgagors meanwhile paid median costs of $7,530. 

Black and Hispanic borrowers are more likely to take out FHA loans versus Asian and white borrowers, the CFPB said, possibly explaining their higher expenses. Hispanic homebuyers paid $9,080, while white borrowers spent just $5,911 upfront. 

Borrowers of color have made gains in the share of total originations in recent years, although they took a step back between 2022 and 2023 in refinance activity. Only Black homeowners saw their share of all refinances grow, from 8.1% in 2022 to 10.2% in 2023. 

The Bureau noted the rise in debt-to-income ratios as cause for denials in recent years, but said the qualification metric stabilized. While DTI denials increased slightly for Black and Hispanic borrowers in 2023, Asians saw their percentage of DTI denials fall 4.8% percentage points last year. 

Leading lenders

A lower HMDA reporting threshold likely contributed to the rise in reporting institutions in 2023 to 5,113 lenders, the CFPB said. Independent mortgage banks accounted for 62% of all originations, similar to their share the year prior. 

There were just 920 IMBs compared to over 4,000 banks and credit unions. Mortgage lending is a fraction of the business for seemingly many of those institutions: 42.2% of all lenders reported fewer than 100 originations in 2023.

Rocket Mortgage had a razor-thin edge in total originations, with 288,000 loans, over United Wholesale Mortgage, although the Detroit-based lender focused more heavily on purchase loans. The CFPB said AmeriSave, Caliber Home Loans, Flagstar Bank, Freedom Mortgage and the since-defunct Home Point Financial Corp. fell out of the top-25 lender rankings.

HELOC slump

Home equity line of credit lending has been in the headlines, but fewer consumers used it in 2023. Total originations that year fell from 1.4 million in 2022 to 1 million, despite hundreds of more originators reporting activity. A third of HELOC players originated between just 100 and 499 such loans. 

The space was dominated by banks and credit unions who accounted for 95.1% of all HELOC volume in 2023. Bank of America and PNC Bank were the largest HELOC lenders, accounting for 6.2% and 5.1% of all volume, respectively. Just 124 independent mortgage banks reported HELOC originations that year.