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Refinance Metrics Strengthen

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The turnaround time on refinance transactions sped up last month, while refinance closing rates increased and refinance share climbed to the highest level since at least 2011. But the closing rate on purchase financing diminished, while government-insured share fell to the lowest level in at least a year and a half.

Out of all the applications started in the previous 90-day cycle, 55 percent had funded as of last month, about the same closing rate as in December. The ratio was better, however, than 46 percent during the same month in 2012.

January’s refinance closing rate was 53 percent, up from 52 percent the previous month, while the purchase closing rate was a little less than 61 percent, off from a little more than 61 percent.

The findings were reported by Ellie Mae based on a 44 percent sampling of mortgage applications that were initiated on its Encompass origination platform. The technology service provider claims that 20 percent of all U.S. originations were processed through its Encompass360 mortgage management software in 2012.

The number of days it took to close a home loan was 54 days during January. While turnaround improved slightly from 55 days a month earlier, it has slowed considerably from 48 days a year earlier. Refinance turn times were cut to 55 days from 57 days in December, while purchase closing times were unchanged at 51 days.

The average FICO score on all closed loans inched up 1 point from the first and final months of 2012 to 749 in January. On denied applications, the average credit score slipped to 707 from 709 but has increased from 702 in January of last year.

The average loan-to-value ratio on all closed loans has been 79 percent each of the last three months, though it was up from 76 percent in January 2012. At 85 percent, there was no change from December in the average LTV on denied applications.

Ellie said that there wasn’t any difference from December in the average debt-to-income ratio, which was 23/34 on closed loans and 27/44 on denied applications. A year prior, the average closed-loan DTI was 24/35.

Last month’s refinance share was 73 percent, increasing for the second month in a row to the highest level since Ellie started tracking the data in August 2011. Refinance share was 69 percent the prior month and two thirds during the same month in the prior year.

Mortgages insured by the Federal Housing Administration accounted for 18 percent of January’s activity, slipping from 19 percent each of the previous four months to the lowest level since tracking began. FHA share has fallen from a quarter in January 2012.

At 2.1 percent, there was no change from December in the share of borrowers who chose to go with an adjustable-rate mortgage. ARM share has diminished from 4.5 percent in the same month last year.

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