Millennial Homeownership Increasing, Use of Bank Lenders Decreasing
Written By: Joel Palmer, Op-Ed Writer
A growing percentage of mortgage borrowers are applying through brokers instead of traditional banks and credit unions, according to lending data made available last week.
The Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) recently published updated loan-level data for public use collected through the National Survey of Mortgage Originations (NSMO). The data provide insights into borrowers' experiences obtaining residential mortgages.
The NSMO is a component of the National Mortgage Database (NMDB), part of the reporting requirements of the Housing and Economic Recovery Act (HERA) and the Dodd-Frank Act.
The latest release provides new data through 2019. Key findings include:
Just more than half of respondents who took out purchase mortgages reported that they were not concerned about qualifying for a loan during the application process in 2019. About two-thirds of refinance borrowers had the same attitude.
The percent of survey respondents who applied through a mortgage broker increased from 2018 to 2019, from 42 to 46 percent for home purchase mortgages and 30 to 38 percent for refinances. The percent of survey respondents who applied directly through a bank or credit union decreased from 2018 to 2019, from 54 to 49 for home purchase mortgages and 67 to 61 for refinances.
Borrowers who thought it was important to have a paperless application process held steady, with 40 percent of purchase borrowers and 44 percent of refinance borrowers responding that it was.
“The NSMO data released today sets a baseline about how borrowers viewed the mortgage process just prior to the COVID crisis,” said FHFA Deputy Director Lynn Fisher. “Releasing this data to the public helps promote an understanding of the specific challenges and successes that borrowers experienced during the mortgage process.”
Separate data released this month by ICE Mortgage Technology showed that May was the third consecutive month that millennials were purchasing more home than refinancing their existing homes. The company attributed this trend to a loosening of FICO requirements.
ICE Mortgage Technology defines millennials as applicants born between 1980 and 1999.
ICE reported that in May 67 percent of loans closed by millennials on its origination platform were for purchases, up from 61 percent in April 2021 and 51 percent in March 2021. Furthermore, purchases accounted for 82 percent of loans closed by younger millennials (born between 1991 and 1999), up from 78 percent in April.
ICE noted that average FICO scores for millennial borrowers decreased for the fourth consecutive month. In May, average FICO scores for borrowers of this generation dipped to 732, down from 734 in April and 739 in March.
“Across the country, we’re seeing a strong and competitive purchase market, particularly among millennials,” said Joe Tyrrell, President of ICE Mortgage Technology. “With FICO score requirements loosening, millennials are taking advantage of the current environment to continue to jump into homeownership.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
