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3,944,602 Home Loan Applications Denied in 2008


Below are some select takeaways from the Federal Reserve’s new report titled, “The 2008 HMDA Data: The Mortgage Market during a Turbulent Year (view here).”

Lending for first mortgages on site-built, owner-occupied home purchases fell 22.3 percent from 2006 through 2007 and an additional 24.5 percent from 2007 through 2008.

Additionally, mortgage refinance lending slipped 18.3 percent from 2006 through 2007, and another 20.9 percent from 2007 through 2008.

Last year, about 14 million loan applications were submitted, with just over 12 million acted upon by mortgage lenders.

A whopping 3,944,602 home loan applications were denied; that’s nearly a third (32.3 percent).

“In 2008, for both home-purchase and refinance conventional lending, blacks and Hispanic whites had notably higher gross denial rates than non-Hispanic whites,” the report said.

“Generally, denial rates for blacks have been the highest, and denial rates for Hispanic whites were between those for blacks and those for non-Hispanic whites.”

Nearly three-quarters (73 percent) of the first-lien home loans reported in 2008 were sold during the same year.

“Higher-priced loans were often sold through the private securitization process; indeed, loans sold through this process diminished considerably, from about 10 percent of sold loans in 2006 to less than 1 percent in 2008,” the report said.

From 1996 through 2005, the share of non-owner-occupant lending rose every year, rising from 6.4 percent to 17.3 percent; it has since fallen to 13.5 percent in 2008.

In 2005 and 2006, lenders extended about 1.3 million junior lien loans to help individuals purchase homes (piggyback seconds).

That number fell to 600,000 in 2007, and contracted a further 84 percent to just about 98,000 loans in 2008.

Nearly one half of purchase money mortgages and one-quarter of refinance loans were backed by either the FHA or the VA by the end of 2008.

“These data show that the FHA share of first-lien, home-purchase loans with LTVs in excess of 80 percent rose sharply in 2008 from just over 20 percent to about 70 percent.”

“While the share of FHA home-purchase loans with LTVs exceeding 95 percent fell modestly from 72.3 percent in 2007 to 67.4 percent in 2008, the median LTV on these loans remained above 97 percent.”

In December 2008, 88.4 percent of first-lien mortgages were 30-year fixed, up from 55.9 percent in January 2006; adjustable-rate mortgages, which accounted for about a third of mortgages back then, made up just 1.2 percent at the end of 2008.

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