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Mortgage Closing Ratio Worse, Credit Tighter

Residential loans closed more quickly last month. But closing ratios deteriorated and credit conditions were more restrictive.

Out of all home loans closed during March, sixty-three percent were conventional mortgages. The share has thinned from two-thirds a year earlier.

At the same time, the share of originated loans insured by the Federal Housing Administration has widened to 23 percent from 22 percent in March 2016.

Also widening was the share of mortgages guaranteed by the Department of Veterans Affairs, to 10 percent from 9 percent a year previous.

Those details, along with a host of other mortgage metrics, were delivered by Ellie Mae Inc. in its March 2017 Origination Insight Report. Ellie Mae extracted the numbers from a 75 percent sampling of loan applications processed through its Encompass origination platform.

Of all mortgages initiated during the previous 90-day cycle,
67.9 percent had closed by last month. The closing rate worsened from 70.6 percent in February and 70.6 percent in March 2016.

The latest month’s closing rate was 64.4 percent on refinances and 74.8 percent on purchases.
The ratios were 69.7 percent on conventional mortgages, 68.5 percent on FHA loans and 64.4 percent on VA mortgages.

It took 43 days to close the typical loan in March 2017, three days faster than the previous month, a day faster than a year previous and the fastest turnaround since February 2015’s 38 days.

Ellie Mae President and Chief Executive Officer Jonathan Corr noted in an accompanying statement that the reduced turnaround came “as Ellie Mae lenders automate more mortgage processes to improve efficiency, quality and compliance.”

Last month’s turnaround was 43 days on both refinances and purchase-money transactions. Conventional time to close was 43 days, while FHA turn times were 44 days and VA loans took 46 days.

Refinance share tumbled to 37 percent last month from 43 percent in February and 45 percent in March 2016. The latest month’s share was 44 percent on conventional loans,
21 percent on FHA mortgages and 30 percent on VA originations.

Two-out-of-three credit metrics tracked by Ellie — credit scores and debt-to-income ratios — were more restrictive in March 2017.

The average FICO score rose to 721 from 720 in February, though it was off a point from the same month in 2016.

On conventional refinances, FICO scores were 727, while they were 753 on conventional purchase-money loans. FHA credit scores averaged 654 on refinances and 684 on purchases, while VA FICOs were 702 on refinances and 708 on purchases.

At 80 percent, the average loan-to-value ratio increased from 79 percent a month earlier but was unchanged from a year earlier.

Conventional LTV ratios were 66 percent on refinances and 80 percent on purchases. The ratio on FHA mortgages was 78 percent on refinances and 96 percent on purchase transactions.
VA loans had 88 percent LTVs on refinances and 98 percent LTVs on purchases.

March 2017’s average debt-to-income ratio was 25/39 percent, tightening from 25/40 percent the prior month and 25/38 percent a year prior.

DTI ratios on conventional mortgages were 26/41 percent on refinances and 23/35 percent on purchases. Ratios averaged 29/46 percent on FHA refinance transactions and 28/43 percent on purchase financing.
On VA transactions, DTI ratios were 25/41 percent.

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