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Closing Rates Rise, Refi Turn Times Slow

Average loan takes 5 days longer to close in December

Jan. 16, 2013

By Mortgage Daily staff

Last month, the number of days it took to close a home loan slowed mostly as a result of longer processing times on refinances. But a bigger share of overall loan applications are converting to funded loans.

During all of 2012 -- a year that saw soaring originations as a result of record-low interest rates and the Home Affordable Refinance Program -- it took an average of 48 days to close a home loan. The process took 49 days for refinances and 46 days for purchase transactions.

Refinances accounted for 62 percent of last year's business, and purchase share was 38 percent.

The data, reported by Ellie Mae, reflect a one-third sampling of all mortgage applications initiated on the Encompass origination platform. Ellie claims that 3 million loan applications, or 20 percent of all mortgage originations, were run through its Encompass360 mortgage management software during 2012.

The average borrower had a credit score of 748 last year. Ellie noted that around 37 percent of 200 million Americans have a score of at least 748.

The average debt-to-income ratio for 2012 was 23/34 percent.

On purchase transactions, borrowers put down an average of 21 percent.

During just December, the average loan took 55 days to close, slowing from 50 days the prior month and 47 days in the same month during the prior year. Refinance turn times jumped to 57 days from 51 days in November, while purchase financing turnaround slowed to 51 days from 48 days.

More than half -- 55 percent -- of applications started three months earlier closed during December. The closing rate improved from 52 percent a month earlier and 48 percent a year earlier.

The refinance closing rate jumped to 52 percent from November's 48 percent. On purchase financing, the closing rate rose to just over 61 percent from just under 61 percent.

The average FICO score slipped to 748 from 750 in November but inched up 2 points from a year prior. Lenders tightened their purse strings somewhat based on denied loans, with the average credit score creeping up to 709 from 707.

There was no month-over-month change in the average loan-to-value ratio, which was 79 percent. The average LTV, however, has climbed from 77 percent in the final month of 2011.

On denied loans, the average LTV slipped to 85 percent from 86 percent.

"Closed conventional refinances with LTVs of 95 percent-plus, a strong indicator of HARP 2.0 activity, jumped up from 9.62 percent in November 2012 to 11.40 percent in December 2012, the highest it has been since we began tracking this data in October 2011," Ellie Mae Chief Operating Officer Jonathan Corr said in the report.

At 23/34, the average debt-to-income ratio hasn't changed for five months. A year previous, the average DTI was 24/35.

Last month's refinance share was 69 percent, up from 68 percent in November and 60 percent in the final month of 2011.

The share of closed loans that was insured by the Federal Housing Administration was 19 percent, the same as in November. FHA share exceeded a quarter in December 2011.

Just 2.1 percent of last month's business was adjustable-rate mortgages, though that was up from 2.0 percent in November. ARM share was 5.4 percent in the same month a year prior.

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