HUD's Figures on 1990 Originations Stir Debate
Quick: What happened to mortgage originations last year?
If you don't know, you're not alone.
The Department of Housing and Urban Development, the official tracker of originations, recently released its 1990 tally - and the results raised more questions than they answered.
HUD reported total originations of $453 billion, a hefty increase over its 1989 tally of $352 billion. But the agency warned that making such comparisons is impossible, because of changes in how it counts originations.
The changes greatly increased the 1990 total - and wrongly so, in the view of some analysts.
"The new numbers are grossly unreliable," said Joseph Hu, a senior vice president at Nomura Securities International, New York. "All of HUD's previous numbers were better."
By Mr. Hu's lights, originations last year totaled about $330 billion - or $123 billion less than HUD reported.
Mr. Hu's number, 6% below HUD's 1989 total, is based mainly on reported home sales. HUD uses surveys of lenders and regulatory data.
A difference of $123 billion can greatly affect the way mortgage lenders, analysts, and policymakers view the mortgage market. For example, did the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. buy 46% or 33% of all originations last year? It depends on whether HUD or Mr. Hu is correct.
Effect of Thrift Bailout Law
And the data flap arises as many experts are trying to understand just how the 1989 thrift bailout law has changed the mortgage market.
"If the numbers aren't reliable, it's a serious situation," said Michael Wilson, deputy director of research for the U.S. League of Savings Institutions.
Up to now, it was widely assumed that commercial banks had taken the lead from thrifts in originations. But the HUD data show that mortgage companies became the biggest originators in 1990, with banks ranking second and thrifts third.
Exactly what this means is hard to determine. For one thing, many large mortgage companies are owned by banks and thrifts, making market-share analysis tricky at best. Moreover, most of the "gains" by mortgage companies stem from changes in HUD's methodology.
HUD obtains its mortgage company data from the Mortgage Bankers Association of America, which surveys a sample of companies and applies the results to a broader universe of companies. For 1990, that universe was greatly expanded to reflect more closely the activity of small companies, said Richard Peach, an economist with the trade group.
Largely as a result of the changes, mortgage company originations shot up 146% from the level reported for 1989. In turn, that pushed up total originations.
John Dickie, a HUD economist, defends the changes as "quality improvements" and adds that data from the past several years soon will be adjusted. That will allow year-to-year comparisons of both volume and market shares by types of lenders.
While HUD and the Mortgage Bankers Association are still discussing how to make the adjustments, the trade group has come up with some preliminary estimates.
The group maintains that 1989 originations were actually $483 billion, suggesting that the total dropped 6% in 1990.
That is the same percentage decline estimated by Mr. Hu of Nomura - but it does not end the debate. Inside Mortgage Finance, a newsletter, has estimated that HUD's 1990 total represents an increase of 7% over 1989. That is based on the newsletter's own "ball-park" adjustment for 1989.
Confused? The best bet may be to just get on with 1991.