While the U.S. residential mortgage market contracted sharply to $1.62 trillion in 2023, a dramatic 36% plunge driven by soaring interest rates, the shifting landscape beneath that headline reveals a story of profound transformation, from a refi-driven market to a purchase-focused one, a rising tide of non-traditional lending, and the evolving challenges and opportunities for lenders and borrowers alike.
Key Takeaways
- In 2023, U.S. residential mortgage origination volume totaled $1.62 trillion, a 36% decrease from $2.52 trillion in 2022, driven by higher interest rates.
- Purchase mortgage originations in Q4 2023 accounted for 78% of total originations, up from 66% in Q4 2022.
- Refinance originations dropped to $181 billion in 2023, representing only 11% of total volume compared to 30% in 2022.
- Serious delinquency rate for conventional loans was 0.64% in Q4 2023.
- Overall mortgage delinquency rate stood at 3.92% in Q4 2023, up 12 basis points from prior quarter.
- FHA/VA delinquency rate reached 10.38% in Q4 2023.
- First-time homebuyers represented 27% of primary mortgage market in 2023, down from 32% in 2021.
- Millennial borrowers (ages 27-42) accounted for 45% of 2023 purchase originations.
- Median borrower FICO score for purchase loans was 758 in 2023.
- Average 30-year FRM rate was 6.81% in 2023.
- 15-year FRM averaged 6.16% for 2023.
- 5/1 ARM rate averaged 6.89% in Q4 2023.
- Dodd-Frank Act compliance costs averaged $2,500 per loan in 2023.
- HMDA reportable volume covered 95% of market in 2023.
- TRID rule violations declined 15% post-2023 audits.
Higher interest rates sharply reduced mortgage lending last year, shifting the market toward purchase loans.
Borrower Demographics
- First-time homebuyers represented 27% of primary mortgage market in 2023, down from 32% in 2021.
- Millennial borrowers (ages 27-42) accounted for 45% of 2023 purchase originations.
- Median borrower FICO score for purchase loans was 758 in 2023.
- 38% of 2023 originations went to minority borrowers, up from 35% in 2022.
- Female-headed households received 18% of FHA loans in 2023.
- Average borrower age for first-time buyers was 36 in 2023.
- Debt-to-income (DTI) ratio averaged 38% for conventional loans in 2023.
- 62% of borrowers were married couples in 2023 HMDA data.
- Black borrowers' denial rate was 14.1% in 2023, versus 7.2% for white borrowers.
- Hispanic borrowers originated 12% of loans with median income $85,000 in 2023.
- Loan-to-value (LTV) ratio averaged 80% for purchases in 2023.
- Gen Z (under 27) share of originations was 6% in 2023.
- Self-employed borrowers were 12% of originations, with average DTI 42%.
- Rural borrowers had median income $72,000, 8% below urban.
- 55% of FHA borrowers had FICO scores below 680 in 2023.
- Asian borrowers had highest median income at $125,000 for 2023 loans.
- Single female borrowers: 22% of market, average loan size $250,000.
- Veterans comprised 9% of purchase borrowers in 2023.
- Borrower liquid reserves averaged 6 months PITI for conventional loans.
- Low-income borrowers (<80% AMI) got 25% of GSE loans in 2023.
- Median family size for borrowers was 2.8 persons in 2023.
- Student debt impacted 15% of denied applications in 2023.
- Gig economy workers: 7% of originations, higher denial rates at 11%.
- Elderly borrowers (65+) share rose to 14% in reverse mortgages.
- Urban borrower DTI averaged 40%, suburban 37% in 2023.
- 28% of Black borrowers used down payment assistance in 2023.
Borrower Demographics Interpretation
The housing market is a tale of two realities: a resilient core of high-scoring, dual-income couples is thriving, yet first-timers are being squeezed out, systemic disparities persist, and a growing share of the market is being propped up by assistance programs and sheer financial grit.
Delinquency and Foreclosure Rates
- Serious delinquency rate for conventional loans was 0.64% in Q4 2023.
- Overall mortgage delinquency rate stood at 3.92% in Q4 2023, up 12 basis points from prior quarter.
- FHA/VA delinquency rate reached 10.38% in Q4 2023.
- Foreclosure starts increased 13% quarter-over-quarter to 0.12% of servicing in Q4 2023.
- 30-day delinquency rate for prime jumbo loans was 1.02% in December 2023.
- Subprime delinquency rate hit 7.85% in Q4 2023.
- Foreclosure inventory rate was 0.29% nationally in Q4 2023.
- FHA serious delinquency (90+ days) was 9.2% in Q4 2023.
- VA loan delinquency rate stood at 4.45% in Q4 2023.
- GSE serious delinquency rate fell to 0.48% in December 2023.
- New foreclosure sales totaled 4,500 in Q4 2023, down 20% YoY.
- 60-day delinquency for conventional loans was 0.85% in Q4 2023.
- Completed foreclosures numbered 28,000 in Q4 2023.
- Delinquency rate in Florida was 4.8% in Q4 2023, highest nationally.
- Prepayment rates averaged 5.2% CPR for 30-year FRMs in 2023.
- Loss severity on foreclosed loans averaged 28% of UPB in 2023.
- Forbearance exits exceeded entries by 15,000 in Q4 2023.
- Modification volume was 45,000 loans in Q4 2023.
- Bankruptcy-related delinquencies were 0.15% in Q4 2023.
- Early-stage delinquency (30-59 days) rose to 2.1% in Q4 2023.
- Foreclosure starts in judicial states averaged 0.10% in 2023.
- Non-agency RMBS delinquency was 5.3% in Q4 2023.
- HEL delinquency rate was 0.72% in Q4 2023.
- Reverse mortgage delinquency rate remained at 1.8% in 2023.
- Investor loan delinquency was 4.2% in Q4 2023.
- Serious delinquency for fixed-rate loans was 0.55% in Q4 2023.
- Foreclosure rate in Mississippi was 0.45% in Q4 2023.
- Overall foreclosure inventory declined 5% YoY to 131,000 properties in Q4 2023.
Delinquency and Foreclosure Rates Interpretation
While the prime conventional market remains remarkably stable, the widening fissures in government and subprime segments suggest we're navigating a two-track housing economy where financial stress is becoming concentrated rather than widespread.
Interest Rates and APRs
- Average 30-year FRM rate was 6.81% in 2023.
- 15-year FRM averaged 6.16% for 2023.
- 5/1 ARM rate averaged 6.89% in Q4 2023.
- Effective APR for 30-year conventional was 7.02% in December 2023.
- FHA 30-year rate averaged 6.95% in 2023.
- Jumbo 30-year FRM hit 7.12% average in 2023.
- VA 30-year rate was 6.75% average in 2023.
- Average origination fee was 1.02% of loan amount in 2023.
- Discount points averaged 0.45 per loan in Q4 2023.
- Yield spread premium for subprime was 2.1% in 2023 non-QM.
- 7/1 ARM rate reached 6.92% in December 2023.
- Total closing costs averaged $6,905 for purchase loans in 2023.
- Prepayment penalty rates averaged 2% for ARMs in 2023.
- Margin on 5/1 ARMs was 2.75% over index in 2023.
- Broker pricing adjustment for FICO <660 was +1.25% in 2023.
- Average lender yield on 30-year was 6.95% in Q4 2023.
- Third-party fees totaled 2.3% of loan amount in 2023.
- Rate lock volume was 92% of applications in high-rate 2023.
- Par rate for TBAs was 6.85% in December 2023.
- Credit spread over Treasuries widened to 150 bps in 2023.
- Non-QM rates averaged 8.2% for 30-year fixed in 2023.
- HELoC rates averaged 8.45% in Q4 2023.
- Reverse mortgage rates implied 5.5% via HECM in 2023.
- Buydown prevalence was 25% of loans in 2023.
- ARM share rose to 10% amid high fixed rates in Q4 2023.
- APR spread over note rate was 0.21% average in 2023.
- 2024 30-year FRM forecasted at 6.4% average.
Interest Rates and APRs Interpretation
In a year where even the most disciplined borrowers felt the sting of rising rates, the mortgage market's persistent premium on risk was both a necessary reality check and a collective financial sigh.
Market Size and Originations
- In 2023, U.S. residential mortgage origination volume totaled $1.62 trillion, a 36% decrease from $2.52 trillion in 2022, driven by higher interest rates.
- Purchase mortgage originations in Q4 2023 accounted for 78% of total originations, up from 66% in Q4 2022.
- Refinance originations dropped to $181 billion in 2023, representing only 11% of total volume compared to 30% in 2022.
- FHA loan originations reached $512 billion in 2023, comprising 32% of the purchase market.
- Conventional conforming loan volume was $789 billion for purchases in 2023.
- Jumbo mortgage originations totaled $142 billion in 2023, down 44% from prior year.
- VA loan originations hit $140 billion in 2023, with 400,000 loans originated.
- Total mortgage applications surged 10% week-over-week in late December 2023.
- Home equity lending volume grew to $35 billion in Q3 2023.
- Reverse mortgage originations increased 12% to 58,000 loans in 2023.
- GSE-backed mortgage volume was $1.1 trillion in 2023.
- Non-agency mortgage production reached $78 billion in 2023.
- Mortgage servicing rights (MSR) market value stood at $1.2 trillion in unpaid principal balance terms in 2023.
- Total outstanding residential mortgage debt reached $12.25 trillion as of Q4 2023.
- First-time homebuyer mortgage share was 27% of originations in 2023.
- Adjustable-rate mortgage (ARM) originations made up 7.5% of total in Q4 2023.
- Credit union mortgage originations grew 5% to $78 billion in 2023.
- Independent mortgage bank (IMB) production volume fell 40% to $900 billion in 2023.
- Top 10 lenders originated 45% of total volume in 2023.
- Mortgage-backed securities issuance totaled $1.4 trillion in 2023.
- HELLOC originations reached $28 billion in 2023.
- Manufactured home mortgage originations were $18 billion in chattel loans in 2023.
- Rural housing mortgage volume via USDA was $12 billion in 2023.
- Investor property mortgage share rose to 18% of originations in 2023.
- Second home mortgage originations totaled $95 billion in 2023.
- Q1 2024 originations forecasted at $450 billion.
- Mortgage market share of portfolio lending was 22% in 2023.
- Digital mortgage originations represented 45% of total in 2023.
- Non-QM lending volume hit $45 billion in 2023.
- Bridge loan volume in residential reached $15 billion in 2023.
Market Size and Originations Interpretation
The market may have caught a cold from rising rates, shrinking by over a third, but its pulse is still beating strongly in a purchase-dominated rhythm, with first-timers, government backing, and digital closings quietly reshaping the heart of the American home loan.
Regulatory and Industry Trends
- Dodd-Frank Act compliance costs averaged $2,500 per loan in 2023.
- HMDA reportable volume covered 95% of market in 2023.
- TRID rule violations declined 15% post-2023 audits.
- GSE affordable housing goals met 2023 targets at 27% low-income.
- CFPB supervised 50 largest servicers in 2023.
- QM rule amendments allowed DTI up to 50% in 2023.
- Basel III capital requirements raised MSR deductions to 10% in 2023.
- 85% of loans met GSE patch QM standards in 2023.
- FinCEN suspicious activity reports in mortgage hit 45,000 in 2023.
- CRA exams passed by 92% of mortgage lenders in 2023.
- TILA-RESPA integrated disclosures used in 98% of closings.
- FHA total MIP rate set at 0.55% annual for most loans in 2023.
- VA funding fee waived for 25% of disabled vets in 2023.
- LIBOR transition to SOFR completed 100% by June 2023.
- AI use in underwriting flagged in 20% of 2023 exams.
- Mortgage servicing transfers totaled 2.5 million loans in 2023.
- ECOA disparate impact cases settled $150 million in 2023.
- UST yield curve control influenced rates via QT in 2023.
- Digital identity verification adopted by 70% of lenders per 2023 survey.
- Climate risk disclosures mandated for large servicers in 2023.
- Nonbank lender market share hit 60% in 2023.
- PACE financing volume grew 18% to $8 billion in 2023.
- Blockchain pilots for title transfer in 5 states by 2023.
- Fair lending training hours averaged 12 per employee in 2023.
- MSR valuations dropped 25% due to rate hikes in 2023.
- Open banking APIs integrated by 40% of lenders in 2023.
Regulatory and Industry Trends Interpretation
The mortgage industry spent 2023 navigating a dense regulatory forest where nearly all loans were observed, compliance was costly but improving, and new rules both opened doors for borrowers and kept lenders on their toes with every step.
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