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Mortgage App Closing Rates Improve Again

As refinance activity remains restrained, loan origination efficiency continues to strengthen — with the closing rate on loan applications increasing again.

In June, 60.7 percent of loan applications started in the previous 90-day cycle closed. The closing rate strengthened from 57.8 percent the previous month.

It was the second month in a row of improvement for the closing rate, which was 54.3 percent during the same month in last year.

The metrics were reported Thursday by Ellie Mae in its Origination Insight Report June 2014. Ellie derived its findings from a 57 percent sampling of applications initiated on the Encompass origination platform.

“For the first time since we began tracking this data in August 2011, the pull-through closing rate eclipsed the 60 percent mark,” Ellie Mae President and Chief Operating Officer Jonathan Corr stated in the report.

Corr added, “Clearly, lenders are working harder than ever to convert and close loans.”

Last month’s closing rate was 61.6 percent on conventional business, 58.0 percent on mortgages guaranteed by the Department of Veterans Affairs and 57.0 percent on loans insured by the Federal Housing Administration.

It took 41 days to close a home loan, slowing from 40 days in May but faster than the 47-day turnaround in June 2013.

At 39 days, turnaround on refinances was three days faster than on purchase transactions. FHA average turnaround of 43 days was three days more than on conventional loans, and VA loan turnaround was in the middle at 41 days.

Although FICO scores tightened in June, increasing 1 point to 728, they were still more relaxed than the 742 average score one year prior.

However, average FICO scores on denied loans fell 3 points to 686 in June.

Credit scores slipped 1 point from May on FHA refinances, dipped 2 points on conventional refinances and were unchanged on conventional purchases.

VA scores jumped 6 points to 706 on refinances but fell 3 points to 708 on purchases.

There has been no change on all loans in the average 82 percent loan-to-value ratio since December 2013, though the average has risen from 80 percent in June 2013.

But on FHA refinances, average LTVs were 83 percent versus 84 percent in May.

The overall average debt-to-income ratio has been unchanged at 24/37 percent since March. But the average was up from 23/35 percent in June 2013.

On denied loans, average DTI ratios were 28/45 percent.

Nearly two-thirds of June originations were conventional loans, while FHA made up just over a fifth and 10 percent were VA mortgages.

That left the non-agency market share at just 5 percent — though even some of that business was USDA.

Reflecting an 11-basis-point decline from May in fixed rates, adjustable-rate mortgage share narrowed to 7.2 percent from 7.6 percent a month earlier but has widened considerably from 4.0 percent a year earlier.

Just 1.6 percent of June’s FHA loans were ARMs, while the share jumped to 9.2 percent on conventional loans.

Fifteen-year mortgage share dropped to 9.0 percent from 9.7 percent in May and 16.5 percent in June 2013.

Refinance share was unchanged last month at a third, though it fell from just over a half the same month last year. The share has not increased since January and has fallen four out of the last five months

But refinance share was only 18 percent on FHA loans, while it was 43 percent on conventional loans. A little more than a quarter of VA loans were refinances.

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