Three years ago, government-insured loans represented about 15% of the mortgage market. Today, they’ve almost doubled, to 27% (see chart). That’s the highest level in recent memory, and it’s causing a shift in the mortgage-lending landscape.
How? First, higher home prices have caused potential homebuyers to seek financing with lower downpayment requirements, a characteristic of government loans. Second, government loan rates have come down substantially relative to rates on conforming loans (those eligible for Fannie Mae or Freddie Mac). Depending on the lending scenario, they can be at least 0.5% lower. Third and perhaps most important, independent mortgage bankers (IMBs) by their very nature are much more adept at originating government loans than banks and credit unions. As a result, these depositories are losing market share and reaching fewer lower- and moderate-income homebuyers.
Along with eroding opportunity for depositories, the changing market landscape has had significant implications for FIs that are subject to the lending requirements of the Community Reinvestment Act (CRA). Although 2024 lending performance will be difficult to impact at this juncture, lenders are engaging with Curinos and our advisory offering to put in place monitoring and strategies for CRA lending performance for the coming year.
Funded Retail Product Distribution
Government-loan share of the mortgage market has almost doubled.
Source: Curinos LendersBenchmark First Mortgage Originations
