MBA NewsLink: The mortgage market is growing. Don't confuse that with recovery.

iEmergent's CEO Laird Nossuli wrote an editorial for MBA NewsLink: "The Mortgage Market is Growing. Don’t Confuse That With Recovery." Here's the article.

The 2025 Home Mortgage Disclosure Act (HMDA) data tells an encouraging story on its face: U.S. mortgage volume grew. Total originations reached $2.12 trillion, up 16.7% from $1.82 trillion in 2024. That kind of year-over-year gain signals a market continuing to build momentum after bottoming out in 2023. 

But the deeper story is more nuanced.

While the market is moving, it is not yet healed. Growth driven primarily by refinancing activity and rising loan balances is not the same thing as a robust, broad-based recovery. It is a market responding to rate signals and price pressures. That distinction matters for how lenders should position themselves.

Here are six observations from this year's data that I think every lender should be sitting with.

1) Refinances are masking a softer purchase market

Refinances jumped to $610.4 billion in 2025, representing 29% of total lending volume, up from 22% the year prior—a significant compositional shift. 

But when refinances grow that fast relative to purchase lending, it tells us that borrowers are reacting to rate movement rather than entering the market out of genuine housing demand. Affordability remains strained across many regions, and limited inventory continues to restrict transaction activity. 

Lenders who are building their entire growth strategy on refinance momentum should be asking themselves a hard question: what happens when rates stabilize? The purchase market is still the engine of long-term, durable growth, and the 2025 data suggests it has not yet regained full steam. 

One area lenders may be overlooking is the demographic composition of purchase demand itself. Minority borrowers represented 32% of purchase applications in 2025, down slightly from 33% in each of the two prior years, but still the highest share of any loan purpose. That share will only matter more as diverse households represent a growing portion of first-time buyer demand in the years ahead. 

2) IMBs extended their lead and owned the minority borrower market

Independent mortgage banks originated 57.8% of mortgage loans, up from 55.9% the previous year, and captured nearly two-thirds of the market's $303 billion in year-over-year growth. In 2025, they dominated the top-25 lender rankings by both loan count and dollar volume. 

Looking at the top 20 lenders by loans to minority borrowers is equally revealing. IMBs claimed 16 of those 20 spots, which speaks to where diverse borrower demand is actually being captured. Of the 1.7 million loans to minority borrowers originated in 2025, volume was heavily concentrated among enterprise lenders with strong purchase-market execution (often supported by builder affiliations) and wholesale or direct-to-consumer channels. If you are a depository institution reading this, that trajectory should be a wake-up call. IMBs have out-competed on speed, specialization, and focus for years. 

Community-focused banks and credit unions should be asking themselves whether they are showing up in the channels, products, and geographies where diverse borrower demand is already concentrated.

3) Rising loan sizes signal affordability stress, not strength

Average purchase loan sizes climbed to $379,600, up from $368,100 in 2024. Refinance loan sizes rose even more sharply, from $272,900 to $311,200. Those increases closely track ongoing home price appreciation amid persistent inventory shortages across many housing markets. 

While higher loan balances boost dollar volume metrics, they also push homeownership out of reach for more would-be borrowers at a time when income growth is not keeping up with monthly housing costs. These affordability pressures remain especially acute for first-time, low-to-moderate income, and minority buyers. 

Lenders who celebrate volume growth without acknowledging that a growing segment of their addressable market is being priced out are not seeing the full picture. Serving price-sensitive buyers more creatively is where lenders should be looking, not just optimizing for larger loan sizes. 

4) High fallout rates are leaving billions in volume on the table

One of the findings I find most important, and most underreported in typical market commentary, is application fallout. Although denial rates declined modestly in 2025, overall application fallout remained elevated. 

Roughly 40% of applications from non-Hispanic white borrowers did not result in funded loans. For Black, Native American/Alaskan and Pacific Islander applicants, that number exceeded 50%. Even higher-income borrowers are not immune; Asian borrowers, for instance, show elevated fallout rates and lower homeownership rates despite carrying larger average loan balances.

The increase in withdrawals and incomplete applications suggests borrowers are running into walls—on valuation, on affordability, and on complexity. Reducing friction throughout the origination process, particularly for underserved communities, is both the right thing to do and a meaningful source of untapped volume. 

Improving pull-through rates starts with the basics: clearer borrower communication, better product alignment, and stronger qualification strategies early in the process. 

5) A handful of winners are swallowing the market

The mortgage industry became more concentrated in 2025. The top five lenders accounted for just over 20% of total loan count and volume, while only 47 institutions—roughly 1% of all reporting lenders—originated half of the nation’s mortgage production.

Scale and operational efficiency continue to separate the industry’s largest producers from the broader field. Larger institutions often benefit from stronger technology investments, wider distribution networks, and greater capacity to manage profitability during volatile market cycles.

Smaller and midsize lenders are facing increasing pressure to differentiate themselves through local expertise, niche product strategies, and market-specific execution.

6) Local strategy matters more than ever

I’ll say it plainly: there is no such thing as a single national mortgage market. For instance, Sun Belt markets leaned heavily toward purchase activity in 2025, with purchase loans making up 71% of volume in Houston and 68% in Austin. Coastal markets saw a stronger refinance mix, reaching 40% in Los Angeles and 38% in San Diego. 

Those differences carry important implications. Markets driven primarily by purchase activity often require stronger affordability positioning and execution-focused sales strategies, while refinance-heavy markets may respond more directly to interest rate movement and borrower retention efforts.

What works in Houston can backfire in Los Angeles. Lenders who apply a one-size-fits-all strategy are leaving money on the table and ceding ground to competitors who know their markets cold.

That's what the HMDA data keeps telling us, year after year. The lenders who win aren't just the biggest or the best-capitalized. They're the ones who understand exactly what's driving demand in the markets they serve and show up ready to execute against it.

The 2025 HMDA data is not a recovery story. It is a repositioning story. The lenders who will win the next cycle are not the ones who simply rode the refinance wave and rising loan balances to record volume. They are the ones reading the fault lines in borrower demographics, local market dynamics, fallout rates, and missed opportunities and building their strategies accordingly. The data tells you where the market is. What you do with that is up to you.