A lot of mortgage applications went unfunded last year. A whole lot. In fact, a full $1 trillion in apps went unfunded for a variety of reasons. Compared to the $1.6 trillion that did get funded, that's a big turndown rate of 38%.
About half of that $1 trillion ($474 billion) came in flat out denials, according to 2010 Home Mortgage Disclosure Act data. Some $307 billion in apps was withdrawn, and the rest came in categories like “preapproval denied,” “approved but not accepted,” “incomplete,” and “preapproval granted but not accepted.”
This huge unfunded number roughly tracks the 2009 results and graphically shows the heretofore anecdotal tightening of underwriting standards in the last couple of years. For 2009, $1.8 trillion was originated and $1.2 trillion unfunded, meaning 40% of apps went unfunded that year.
The 2010 HMDA numbers show large percentages of unfunded mortgages to minorities (tracking loans to minorities was one of the primary reasons HMDA was enacted). In all cases the success rates are less than the national average of 62%, and in all but one case lower than 50%.
Hispanics, for example, were granted $79.5 billion in mortgages during 2010 from a total of $177 billion in apps. That's only about 45%. (The government counts Hispanic as an “ethnicity” rather than a race.) Asian Americans fared somewhat better, getting $124 billion in loans out of a total of $224 billion, or about 55%. African Americans were well below 50%, at $51 billion granted from $129 million in apps. That's about 39.5% successful. American Indians and Alaska Natives had a success rate of about 42%, while Native Hawaiians took in nearly $6 billion out of $12 billion, or nearly 50%. (There probably is some funkiness to these minority comparisons based on the effects of loan purchases, which would boost minority success rates, but the trend of a large unfunded percentage is clear.)
A good question for the industry to consider is, how many good mortgages are being left on the table because of the pendulum swing of no underwriting (at least on the subprime side) five years ago to the supertight underwriting of today? It's impossible to quantify but certainly it is a lot. The unfunded rates for minorities are large. That's also suggestive that there are some loans being left on the table from these cohorts.
Total originations to minorities came to $267 billion in 2010, down from $284 billion in 2009, a drop in line with the national drop from $1.8 trillion to $1.6 trillion.
That's just 16.7% of all mortgages going to minorities in 2010, well below their representation of more than a third of total population. But it's up nearly 100 basis points from 15.8% in 2009.
Wells Fargo was the clear leader in minority lending, with more than $48 billion (including the volume of its finance unit, Wells Fargo Funding). Bank of America came second, with about $30 billion.
Wells bested B of A in Hispanic originations by $11.4 billion to $7.7 billion, the HMDA data show.
Wells was the leader in Asian originations as well, by $21 billion to B of A's $15 billion. Wells bested B of A in lending to blacks, by $6.8 billion to $4.6 billion, and swept both Native categories, Native American, ($1 billion to $590 million) and Native Hawaiian ($821 million to $564 million).
JPMorgan Chase took the bronze in lending to minorities in 2010, according to the HMDA numbers, at $11.4 billion.
