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Closing Ratios Improve

As refinance activity continues to dry up, loan originators are working harder to close loans — pushing the closing rate up. But despite declining business, conventional underwriters didn’t make concessions on qualifications compared to the prior month.

The closing rate climbed to 57.8 percent in May from the prior month’s 55.0 percent. In the same month last year, 53.5 percent of loans started in the previous 90-day cycle closed.

Refinances had a 52.3 percent closing rate in the latest report, while the purchase closing rate in May was 61.6 percent.

The closing rate on loans insured by the Federal Housing Administration was 53.6 percent last month, while it was 58.7 percent on conventional loans and 56.2 percent on loans guaranteed by the Department of Veterans Affairs.

The findings were presented in Ellie Mae’s Origination Insight Report for May, which was based on a 57 percent sample of applications initiated on the Encompass origination platform.

Last month’s average closing took 40 days to complete, more than the 39-day turnaround in April but faster than the 44 days it took in May 2013. Refinance turnaround lengthened to 39 days from 37 days the prior month, while purchase turnaround was unchanged at 40 days.

The average closed loan had a FICO score of 727 in May, 1 point higher than the prior month but 16 points below May 2013.

FHA refinance credit scores dropped 2 points from April, but scores on convention refinances were up 3 points.

Average loan-to-value ratios of 82 percent were the same as in April and more than 79 percent a year earlier.

Debt-to-income ratios averaged 24/37 percent, also unchanged from the previous month but up from 23/35 percent in the year-earlier period.

Refinance share, which had already fallen in April to the lowest level ever reported by Ellie — 37 percent — diminished further to a third. A year earlier, refinance share was 58 percent.

On just FHA loans, refinance share was only 19 percent last month, while it was 40 percent on conventional loans and 28 percent on VA loans.

FHA share was 22 percent, where it’s been since February. In May 2013, FHA share was 19 percent.

Adjustable-rate mortgages accounted for 7.6 percent of May’s total production, the same as a month earlier. ARM share was up, however, from 4.0 percent in the same month last year.

Just 9.7 percent of borrowers last month opted for a 15-year mortgage. Fifteen-year share tumbled from 12.2 percent in the prior report and sank compared to 16.4 percent in the year-earlier report.

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