Credit score requirements on government-insured closings fell to the lowest level in at least two-and-a-half years. Meanwhile, originators cut five days off the amount of time it took to close a loan to finance a home purchase — helping to push the closing rate on purchase loans to the highest level since at least 2011.
Out of all loans started in the previous 90-day cycle, 55.3 percent closed in February — the highest closing rate since July of last year’s 55.4 percent.
Ellie Mae reported the statistics in its Origination Insight Report based on a 57 percent sampling of applications run through its Encompass origination platform.
On purchase financing, the closing rate rose to 62.0 percent — the highest level ever recorded by Ellie based on the oldest available data back to November 2011.
The average loan closed in 41 days last month, four days faster than in January and the shortest turnaround since August 2013. Time to close was nine days less than in the same month last year.
Originators cut four days of the refinance process, which took an average of 40 days last month. The improvement was even more impressive on purchase financing, with turnaround falling five days to 42 days.
The average FICO score on last month’s closings was 724, unchanged from January. But lenders lowered their standards from February 2013, when credit scores averaged 743.
On denied loans, average FICO scores fell to 689 in February from the prior month’s 692.
Credit scores on refinances insured by the Federal Housing Administration declined to 669 — the lowest score ever reported by Ellie based on data back to August 2011. FICO scores fell from 688 in January to 686 on FHA purchase transactions — also a record low.
But just the opposite happened on conventional refinances, with average credit scores increasing to 730 from 727.
The average loan-to-value ratio on all loans was 82 percent, unchanged from the previous month. A year earlier, LTVs averaged 80 percent.
But lenders were more restrictive on denied loans, with average LTV ratios slipping to 82 percent from 83 percent in January.
Ellie reported that debt-to-income ratios averaged 25/38 percent, slightly tighter than 25/39 percent in January but looser than 23/35 percent in the same month last year.
DTI ratios on denied loans rose to 28/45 percent from 28/44 percent in January.
FHA-insured business is becoming a bigger factor in monthly activity; February’s FHA share of 22 percent was more than any month since April 2013. FHA share was 20 percent in the year-earlier report.
Last month’s refinance share dropped to 43 percent from 47 percent in January. During the same month in 2013, refinance share exceeded two-thirds.
“The share of purchase loans jumped four percentage points, representing 57 percent of all closed loans in February 2014,” Ellie Mae President and Chief Operating Officer Jonathan Corr said in a written statement. “This is the first time in four months that the share of purchase loans increased month over month and the largest one-month increase since August 2013, when the share of purchase loans also jumped four percentage points.”
The share of borrowers who opted for an adjustable-rate mortgage slipped to 6.9 percent from 7.2 percent in January. Still, ARM share has widened considerably from 2.3 percent in February 2013.