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Mortgage Originations Shift from FHA to Conv

Compared to a year ago, conventional share has increased at the expense of government-insured share. Rising rates are impacting refinance share and, in turn, closing times.

Out of all the home loans that were originated during March, two-thirds were conventional mortgages. Conventional share widened from 63 percent a year previous.

The widening conventional share came at the expense of the share of loans insured by the Federal Housing Administration, which thinned to a fifth from 23 percent.

No change in the share of loans guaranteed by the Department of Veterans Affairs left it at a 10th.

Those were among a host of statistics reported in the March 2018 Origination Insight Report  from Ellie Mae Inc.

The closing rate deteriorated, dipping to 69.6 percent from 70.6 percent. But there was no difference in the closing rate versus the same month last year. Refinances had a 64.9 percent closing rate, while purchase transactions had a stronger ratio: 76.3 percent.

The closing rate was 70.2 percent on conventional loans, 67.9 percent on FHA business and 65.3 percent for VA production.

According to the report, it took 41 days to close a mortgage last month, a day faster than in February and two days more quick than in March 2017. At 37 days, refinances took six days less than purchases to close.

“As we’ve seen in the past several months, the shift to a purchase market coupled with the adoption of digital mortgage solutions by our customers aids in driving down the time to close,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in an accompanying statement.

Turnaround was 40 days on conventional mortgages, 42 days on FHA fundings and 46 days on VA originations.

FICO scores averaged 722 on last month’s originations, up a point from a month earlier and a year earlier.

Conventional refinances had average credit scores of 728, and conventional purchases averaged 752. On FHA transactions, scores averaged 652 on refinances and 677 on purchases while scores were
698 on VA refinances and 708 on VA purchases.

At 79 percent, average loan-to-value ratios were up from 78 percent but less than 80 percent as of March of last year.

Conventional LTV ratios averaged 64 percent on refinances and 81 percent on purchases, and they were 78 percent on FHA refinances and 96 percent on FHA purchases.
Ratios on VA closings were 26/42 percent on refinances and purchases.

The average debt-to-income ratio slipped to 26/39 percent from February’s average of 26/40 percent. But average DTI ratios were a little looser than 25/39 percent
in the same month during 2017.

DTI ratios averaged 26/40 percent on conventional refinances and 24/36 percent on conventional purchases. For FHA fundings, ratios averaged 29/47 percent on refinances and 29/44 percent on purchase-money loans. For both types of VA transactions, the average was 26/42 percent.

Refinances accounted for 38 percent of March production. The share was cut from 43 percent the prior month but was modestly wider than 37 percent a year prior. Refinance share was 43 percent on conventional transactions, 23 percent on FHA mortgages and 28 percent on VA closings.

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