For three consecutive months, credit scores on new residential loans have been on the rise and loan-to-value ratios have either fallen or haven’t increased. Mortgage loan originators are taking longer to fund a loan, but more of the applications they are taking are closing. Activity from the government’s refinance program is ebbing.
It took 49 days to close a loan during August, lengthening from 48 days a month earlier and slowing considerably from 40 days in the same month last year.
Turnaround on purchase financing was unchanged from July at 47 days, but the refinance process was extended to 51 days from 48 days.
Ellie Mae reported the statistics in its Origination Insight Report August 2012.
The findings were determined from a one-third sampling of applications initiated on the Encompass origination platform. The Encompass360 mortgage management software was used for approximately two million loan applications during 2011, according to Ellie. That worked out to 20 percent of all U.S. originations.
But while it took longer to close a loan last month, the closing rate was better — rising to 47.8 percent from 45.8 percent a month earlier. Closing rate reflects funded loans with applications started within the prior 90 days.
Refinance closing rates were 40.9 percent, improving from July’s 37.9 percent rate. On purchase transactions, the closing rate climbed to 60.1 percent in August from 58.7 percent.
The average FICOÂ score on all mortgages originated in August was 750, better than 748 in the prior month. FICOÂ scores have improved each month since May, when the average was 744. In the year-earlier period, the average was just 741.
But lenders still relaxed their credit score requirements last month, with the average FICO on denied applications falling to 708 from 710. However, lenders are much tighter than a year previous, when the average score for a denied application was just 696.
August saw an average loan-to-value ratio of 79 percent on closed loans, lower than 80 percent in the prior report and unchanged from the same month in the prior year. The average LTVÂ ratio hasn’t increased since May, when it was 81 percent.
As was the case with credit scores, average LTVs on denied loan applicants worsened — to 88 percent from July’s 85 percent. LTVs were also more relaxed than the 82 percent during August of last year.
For conventional refinance applications that were denied, the average LTV jumped to 87 percent from 82 percent.
At 23/34, the average debt-to-income ratio for all business was the same as in July and lower than 25/36 in August 2011. DTI ratios for denied applications were lower, falling to 27/43 from 28/44 in July.
Refinance share was 61 percent, climbing from 58 percent in July. Refinance share was the same in August 2011.
Ellie Mae Chief Operating Officer Jonathan Corr noted in the report that the share of refinances with LTVs of at least 95 percent was down for the third consecutive month to 7.74 percent. Corr said that the decline is a possible sign that refinances closed through the expanded Home Affordable Refinance Program are slowing.
Loans insured by the Federal Housing Administration accounted for 21 percent of August activity, slipping from the prior month’s 24 percent. FHA share was much stronger at 29 percent a year earlier.
