While the ongoing trend of mortgage lenders easing credit standards continues, a smaller share of loan applications are closing. Average credit scores on government-insured refinances fell four points last month.
Just 52.3 percent of all loan applications started in the previous 90-day cycle closed during September — the lowest closing rate since November 2012, when it was also 52.3 percent.
A month earlier, 53.1 percent of mortgage loan applications closed. But the closing ratio was better than 50.5 percent a year earlier.
The details were spelled out in the Ellie Mae Origination Insight Report for September 2013. Ellie, which claims to touch one-in-five residential loan closings, utilizes a sample of loan applications that run through its Encompass360 mortgage management software and the Ellie Mae Network to come up with the monthly statistics.
The closing rate on refinances slipped to 45.2 percent in September from the previous month’s 46.8 percent, while the decline was greater for purchases — falling to a 59.6 percent closing rate from 61.5 percent.
It took 42 days to close the average home loan last month, a day longer than in August. But turnaround sped up from 50 days a year earlier.
The time to close shortened on refinances to 40 days from 41 days in August but lengthened to 43 days from 42 days for purchase transactions.
Lenders continued to ease up on credit scores, with the average FICO score falling for the fourth consecutive month to 732 from 734 in August. Credit scores averaged 750 in September 2012.
The drop in average FICO scores was most apparent with refinance loans insured by the Federal Housing Administration — tumbling to 687 from 691 in August.
Average loan-to-value ratios tightened to 81 percent from 82 percent, though the average was greater than 78 percent a year prior.
The tightening of LTV ratios appeared to be concentrated in Home Affordable Refinance Program transactions, with average LTV ratios on conventional refinances falling to 72 percent last month from 74 percent in August.
Debt-to-income ratios averaged 25/37 percent, expanding from 24/37 percent in August and 23/34 percent in September 2012.
On denied applications, average FICO scores and LTV ratios were unchanged from August at 696 and 84 percent, respectively. Average DTI ratios, however, increased to 28/45 percent from 28/44 percent.
Just 42 percent of September production was refinance, slipping from the prior month’s 43 percent. Refinance share has fallen for four consecutive months and has not risen since January, when it was 73 percent. In September of last year, nearly two-thirds of originations were refinances.
The share of activity that was insured by the Federal Housing Administration was 19 percent, inching up from 18 percent in August but unchanged from the same month in 2012.
