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Refi Share Surges as Lenders Relax Requirements

Last month saw a significant surge in refinance share. While loan-to-value ratios tightened, other metrics were more flexible. Turn times have sped up over the past year.

Of all single-family loans closed during January, 67 percent were conventional mortgages, more than the 66 percent share in the first month of last year.

Mortgage insured by the Federal Housing Administration accounted for 19 percent of last month’s production, less than 21 percent a year previous.

But the share of closings that were guaranteed by the Department of Veterans Affairs has widened to one-tenth from 9 percent in January 2017.

Those statistics and many more were presented by Ellie Mae Inc. in its
January 2018 Origination Insight Report.

At 70.9 percent, the closing rate was slightly diminished from 71.2 percent in the final month of last year and worse than 72.2 percent in the first month of last year. The closing rate on refinances was 65.5 percent, while it was 75.7 percent on purchase-money transactions.

The closing rate was 71.6 percent on conventional transactions, 68.9 percent on FHA business and 65.7 percent on VA mortgages.

The average home loan took 44 days to close in January 2018, the same as in December but seven days faster than in January 2017. Refinances took 40 days, a day less than the preceding month, while loans to finance a home purchase lengthened by a day to 47 days.

Conventional closing times were 43 days, FHA turnaround was 47 days, and VA time to close was 50 days.

Average FICO scores slipped to 721 from 722 a month earlier and a year earlier. For conventional mortgages, average scores were 730 on refinances and 751 on purchase financing. Credit scores averaged 645 on FHA refinances and 680 on FHA purchases, and they were 698 on VA refinances and 708 on VA purchases.

The average LTV ratio tightened to 77 percent from 79 percent in December 2017 and 78 percent in January 2017. The ratio was 65 percent on conventional refinances and 80 percent on conventional purchases. On FHA production, LTV ratios averaged 77 percent on refinances and 96 percent on purchases. For VA transaction, the ratio was 89 percent on refinances and 98 percent on purchases.

Debt-to-income ratios averaged 26/40 percent, loosening from 25/39 percent the prior month and 25/39 percent a year prior. Conventional refinance DTI ratios were 25/40 percent and 24/36 percent on conventional purchases. The ratio for FHA loans was 29/48 percent on refinances and 29/44 percent on purchases. The average ratio on both VA refinances and purchases was 26/42 percent.

Last month’s refinance share jumped to 45 percent — the widest it’s been since it was 47 percent in January 2017 — from 40 percent in December. Refinance share was 51 percent on conventional loans, 28 percent on FHA transactions and 34 percent on VA mortgages.

“As we ring in 2018, we see refinances rise as a percent of overall loan volume, something that we have seen every January since we began reporting this data,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in an accompanying statement. “This increase in the percentage of refinances is attributed to slower seasonal purchase market carrying over from the end of 2017. Our expectation is percentage of refinances will taper back off to industry projected levels of 25 to 30 percent in the coming months as the purchase market resumes its momentum.”

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