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Home Lenders Take More Risk, Gov Share Shaken Up

There was a significant change in the share of government home-loan originations last month. Meanwhile, lenders took more risk with credit scores and debt-to-income ratios.

Exactly two-thirds of loan originations during January were conventional mortgages. The share was no different than the prior month and mildly wider than 65 percent a year prior.

Another 21 percent of last month’s production was loans insured by the Federal Housing Administration, up from 20 percent in December but off from 22 percent in January 2016.

Ellie Mae Inc. delivered the statistics in its January 2017 Origination Insight Report. The metrics were reportedly derived from a 75 percent sampling of all mortgage applications initiated on the Encompass origination platform.

Mortgages guaranteed by the Department of Veterans Affairs made up another 4 percent of January 2017 activity, sinking from 9 percent a month earlier but the same as a year earlier.

The remaining 9 percent of January 2017’s originations were classified as “other,” fattening from just 4 percent the previous month and 3 percent a year previous.

Last month’s closing rate was 72.2 percent, deteriorating from 73.2 percent in December but still better than 68.4 percent in January 2016.

Of all refinances started in the previous 90-day cycle, 67.9 percent had closed as of January 2017. The purchase-money closing rate was 76.8 percent.

Closing rates in the most-recent month were 71.9 percent on conventional mortgages, 70.0 percent on FHA loans and 67.4 percent on VA mortgages.

The time to close a loan was 51 days, a day longer than in the final and first month of last year. Refinance turnaround was 53 days, and purchase financing took 48 days on average.

Time to close in January 2017 was 51 days on conventional loans, 50 days on FHA mortgages and 53 days on VA loans.

Ellie Mae’s data indicate that FICO scores averaged 722, tumbling four points from December but rising three points from January 2016.

FICO scores during January 2017 on conventional mortgages were 732 on refinances and 752 on purchases. On FHA loans, credit scores averaged 651 for refinances and 686 for purchases, while VA scores were 707 on both refinances and purchases.

Loan-to-value ratios averaged 78 percent in January 2017, the same as the prior month but tighter than 79 percent a year prior.

For conventional transactions, LTV ratios averaged 66 percent last month on refinances and 80 percent on purchases. LTV ratios averaged 78 percent on FHA refinances and 96 percent on FHA purchases.
Refinance LTV ratios averaged 87 percent on VA loans, and VA purchases had an average ratio of 98 percent.

At 25/39 percent, DTI ratios were slightly looser than 25/38 percent in December and unchanged from the same month last year.

January 2017’s average conventional refinance had DTI ratios of 25/40 percent, while conventional purchase ratios averaged 23/35 percent. DTI ratios averaged 29/47 on FHA refinance transactions and 96 percent on FHA purchase financing. On VA originations, DTI ratios averaged 25/41 percent on refinances and purchases.

Last month’s refinance share was 47 percent, widening from 46 percent in December 2016 but no different than in January 2016.

Refinance share was 56 percent
on conventional loans, 26 percent on FHA mortgages and 35 percent on VA loans.

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