Compared to a year ago, home lenders took more risk on mortgages closed last month as government share has widened. Closing ratios and turnaround improved from a month earlier.
In August, conventional mortgages accounted for 64 percent of all home loans originations. The share thinned from 68 percent in the same month last year.
At the same time, loans insured by the Federal Housing Administration made up 22 percent of last month’s production, widening from 20 percent in August 2016.
Another 10 percent of the latest month’s activity was mortgages guaranteed by the Department of Veterans Affairs. VA share was more broad than 9 percent a year earlier.
Ellie Mae Inc. reported the data along with a wealth of other metrics in its August 2017 Origination Insight Report. The findings were derived from an 80 percent sampling of mortgage applications initiated on the Encompass mortgage management solution.
Out of all home loans started in the prior 90-day cycle, 71.7 percent closed in August 2017. The closing rate improved from 70.6 percent the prior month but worsened from 72.3 percent a year prior.
Refinances had a 63.9 percent closing rate, and purchases had a 76.8 percent ratio. The conventional closing rate was 72.1 percent, the rate on FHA loans was 70.1 percent, and the VA rate was 67.8 percent.
The average loan took 42 days to close last month, a day faster than in July of this year and four days quicker than in August of last year. Refinance turnaround was 41 days, and purchase financing took 43 days.
The time table was 41 days on conventional mortgages, 43 days on FHA loans and 46 days on VA mortgages.
FICO scores averaged 724 on August 2017’s production, the same as in the preceding month but plunging seven points from the same month in 2016.
Credit scores were 730 on conventional refinances and 752 on conventional purchases. FHA scores averaged 649 on refinances and 683 on purchases, and VA scores were 702 on refinancings and 710 on purchase financing.
While there was no change in the average 80 percent loan-to-value ratio, it was looser than 79 percent in the report from a year ago.
Conventional LTV ratios averaged 65 percent on refinances and 80 percent on purchases. Ratios on FHA refinances were 78 percent, and FHA purchase ratios averaged 96 percent. The average LTV ratio was 89 percent on VA refinances and 98 percent on VA purchases.
Debt-to-income ratios crept up to 25/39 percent from 25/38 percent and were even more relaxed versus 24/37 percent in August of last year.
DTI ratios averaged 25/39 percent on conventional refinances and 23/35 percent on conventional purchase financing. On FHA transactions, the ratio was 29/46 percent on refinances and 28/43 percent on purchases. Both types of VA loans had a 25/41 percent DTI ratio.
Last month’s refinance share was unchanged from July at 35 percent. The share thinned, though, from 43 percent in August of last year.
Conventional refinance share was 42 percent in August 2017, while FHA refinance share was 21 percent, and VA share was 29 percent.
