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Refinance Share at Nearly 2-Year High

It’s been almost two years since refinance share has been as wide as it was last month. Closing ratios on all loans deteriorated, while credit scores on government-insured refinances soared.

Of all the residential loans that were initiated during the previous 90-day cycle, 60.0 percent
closed in February.

The closing rate diminished from 62.4 percent the prior month. But an improvement was noted compared to same month in 2014, when it stood at 55.3 percent.

Those were just some of the findings from Ellie Mae’s latest Origination Insight Report. The data were culled from a two-thirds sampling of applications initiated on the Encompass platform.

On conventional mortgages, last month’s closing rate dropped to 60.4 percent from 62.7 percent, while it plunged to 54.8 percent from 57.0 percent in January on loans insured by the Federal Housing Administration.
On mortgages guaranteed by the Department of Veterans Affairs, the closing rate retreated to 63.2 percent from 65.5 percent.

The closing rate was highest on VA purchase transactions, at 73.0 percent, and lowest on FHA refinances, at 34.4 percent.

The loan production process took 38 days in most-recent month, speeding up from 40 days a month earlier and 41 days a year earlier.

Time frames fell to 36 days from 39 days on refinances and were unchanged at 40 days on purchase financing.

It took an average of 37 days to close a conventional mortgage. FHA turnaround was 38 days, while VA turn times were 39 days.

Conventional share of February’s originations was 69 percent. FHA loans represented another 19 percent, and VA share was 9 percent.

Ellie reported that the average FICO score last month was 732 —
the highest it’s been since October 2013.

Credit scores averaged 731 in January 2015 and 724 in February 2014.

Conventional refinance credit scores
jumped six points in February 2015 to 747, while conventional purchase transactions saw credit scores rise two points to 754.

FICO scores on FHA refinances leapt 16 points from January to 690, and a one-point rise left average scores on FHA purchases at 683.

VA refinance credit scores inched up one point to 717 in February.

But VA purchases bucked the trend, with average credit scores falling two points from January to 702.

On all closings, average loan-to-value ratios were unchanged from January at 79 percent. LTV ratios, however, were lower than 82 percent in February of last year.

No change on conventional refinances left the average LTV ratio at 70 percent. LTV ratios on conventional purchases climbed to 81 percent from 80 percent.

LTV ratios on FHA-insured refinances soared to 89 percent in February 2015 from the previous month’s
82 percent. There was no change, however, to the average 95 percent LTV ratio on FHA purchase financing.

On VA mortgages, average LTV ratios remained at 90 percent on refinances and 98 percent on purchase financing.

Moving along to debt-to-income ratios, the average was 24/37 percent, the same as in January. DTI ratios dipped from 25/38 percent in February 2014.

At 24/36 percent, DTI ratios on conventional refinances were off from 24/37 percent during January. They dipped to 22/34 percent from 23/35 percent on conventional purchase transactions.

FHA refinances saw average DTI ratios decline to 26/40 percent from 27/41 percent, and ratios fell to 27/40 percent from 28/41 percent on FHA purchases.

DTI ratios averaged 24/38 percent on VA refinances, off from 24/39 percent in January. On VA purchase mortgages, the ratio was unchanged at 24/39 percent.

Refinances represented 59 percent of February’s closings — the highest share since March 2013, when refinance accounted for 62 percent of all business.

In January 2015, refinance share was 51 percent, while it
came in at 43 percent in February 2014.

Last month’s refinance share was 68 percent on conventional mortgages, 36 percent on FHA business and 41 percent of VA activity.

One out of every 25 loans was an adjustable-rate mortgage last month. ARM share dropped from 5.1 percent in January and 6.9 percent in February 2014.

Fifteen-year mortgages were utilized by 11.1 percent of borrowers in February, climbing from the previous month’s 10.8 percent but off from 13.3 percent in the same month last year.

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