Mortgage Daily

Published On: December 21, 2016

Monthly metrics for mortgage originations have yet to reflect the impact from the presidential election — with the closing rate deteriorating, turnaround slowing and refinance share holding.

Of all residential loans closed during November, 68 percent were conventional mortgages, the same share it’s been since August. Conventional share widened from 64 percent a year earlier.

Mortgages insured by the Federal Housing Administration accounted for a fifth of all originations, also unchanged for four consecutive months but thinner than 23 percent in November 2015.

9 percent of last month’s originations were guaranteed by the Department of Veterans Affairs. While VA share hasn’t changed since February, it thinned from 10 percent in November 2015.

Ellie Mae Inc. delivered those details and more in its November 2016 Origination Insight Report. The findings were derived from
a three-quarters sampling of mortgage applications initiated on the Encompass origination platform.

Last month’s closing rate was 72.2 percent. The rate, which reflects loan applications started in the previous 90-day cycle that have closed, slipped from 73.0 percent in October but improved from 68.4 percent in November 2015.

The November 2016 closing rate was 72.6 percent on conventional loans, 69.3 percent on FHA mortgages and 66.2 percent on VA transactions.

The average home loan took 49 days to process and close, a day longer than in October but the same as in November 2015. Turnaround was 51 days on refinances and 47 days on purchases during November 2016.

Conventional and FHA loans took 49 days to close last month, while the time to close was 52 days on VA mortgages.

FICO scores on all loans averaged 728 in the most-recent period.
Credit scores eased from 730 in October but tightened from 721 in November 2015.

Credit scores were 743 on conventional refinances and 753 on conventional purchases. FHA loans had average FICO scores of 654 on refinances and 686 on purchases.
VA refinance scores averaged 710, and VA purchase financing scores were 709.

Ellie reported the average loan-to-value ratio at 78 percent in the most-recent month, the same as a month earlier and lower than 79 percent a year earlier.

LTV ratios on conventional mortgages averaged 66 percent on refinances and 80 percent on purchase financing. On FHA transactions, LTV ratios averaged 79 percent on refinances and 96 percent on purchases.
Refinance VA LTV ratios averaged 87 percent, and VA purchases averaged 98 percent.

The average loan had a 24/38 percent debt-to-income ratio, easing from 24/37 percent in October but tighter than 25/39 percent in November 2015.

Conventional closings had an average 24/37 percent DTI ratio on refinances and 23/35 percent on purchase-money loans. DTI ratios averaged 29/46 percent on FHA refinances and 28/42 percent on FHA purchases.
On all VA transactions, DTI ratios were 24/40 percent.

Last month’s refinance share was 47 percent, the same as in October and wider than 46 percent in November 2015. Refinance share in November 2016 was 58 percent on conventional loans, 22 percent on FHA mortgages and 30 percent on VA loans.

“As expected, homebuyers are trying to complete refinances as rates begin to rise,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in an accompanying announcement. “We believe that the strong refi market caused the increase in time to close in November, a data point that we’ll watch as the purchase market picks up in early 2017.”

Interest rates on residential loans have turned sharply higher since the Nov. 8 election. Given the 49-day average closing time, the slowdown in refinance activity won’t likely reflect until January 2017’s Origination Insight Report that will be issued in February. With higher rates likely to drive down refinance originations, refinance share will diminish, while closing rates and time to close are likely to improve.

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