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Mortgage Turnaround, Closing Rate Improve

Mortgage originators shaved a couple days off of processing time for home loans and lifted the closing rate on last month’s closings.

On residential loans that were closed during the month of March 2016, two-thirds were categorized as conventional mortgages.

In the government category,
22 percent of last month’s loan closings were mortgages insured by the Federal Housing Administration.

Another 9 percent were guaranteed by the Department of Veterans Affairs.

Those were just some of the details in the Origination Insight Report March 2016 from Ellie Mae Inc. Findings were based on a two-thirds sampling of applications initiated on Ellie’s Encompass origination platform.

The time to close a loan was 44 days last month, two days faster than in February and the shortest time since it was 44 days in March 2015.

Refinances took 41 days to close in the latest month, while purchase turn times were 45 days.

Conventional turnaround of 43 days was a day faster than FHA turnaround and five days more rapid than the VA process.

Of all the loans funded last month, 71 percent closed, improving from 70 percent a month earlier and just 64 percent a year earlier.

Ellie Mae CEO Jonathan Corr noted in the report that last month’s closing rate was the strongest since tracking began in August 2011.

The closing rate was two-thirds last month on refinances and three-quarters on purchases.

Conventional closing rates in March 2016 were 70 percent, FHA rates averaged 68 percent
and the VA rate was 63 percent.

Credit scores tightened, with the average FICO rising to
722 from 720 in February.
But conditions are looser than in March 2015, when scores averaged 731.

Corr noted that “we’re still seeing credit remain relatively tight with 67 percent of closed loans having FICO scores of 700 or above.”

Conventional refinance production had an average FICO score of 731, and the average was 753 on conventional purchases.

Scores averaged 652 on FHA refinances and 685 on FHA purchases, and VA scores averaged 706 on refinances and 704 on purchase financing.

Loan-to-value ratios on all loan types tightened to 80 percent from 79 percent a month earlier and a year earlier.

LTVs on conventional refinance production averaged 69 percent, while it was 81 percent on purchase transactions.

FHA refinances had an average LTV ratio of 79 percent. FHA purchase financing ratios averaged 96 percent.

On VA-guaranteed refinances, LTVs averaged 89 percent and shot up to 98 percent on purchases.

Overall debt-to-income ratios
tightened to 25/38 percent from 25/39 percent, though the metric was looser than 24/37 percent in March 2015.

DTIs averaged 25/39 percent on conventional refinances and 22/34 percent on
conventional purchases.

FHA DTIs averaged 28/45 percent on refinances and 27/41 percent
on purchase-money loans.

Both types of VA loans had average DTIs of 24/40 percent.

Refinance share slipped to 45 percent from 46 percent in February. Refinance share has been trimmed more considerably since it was 53 percent in March 2015.

On just conventional loans, refinance share was 56 percent last month. FHA-insured loans had a refinance share of only a fifth, and VA refinance share was 27 percent.

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