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Originators Improve Closing Rate

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Loan originators are finding their groove in today’s new environment — closing a bigger share of applications than during any month since at least 2011. Meanwhile, lenders have loosened their purse strings as refinances represented a smaller share of overall business.

The closing rate was 56.8 percent last month. The rate, which is defined as the “percentage of loan applications begun in the previous 90-day cycle that have closed,” improved from 55.0 percent in January.

February’s closing rate was also better than a year prior, when the ratio was just 47.9 percent, and the highest since tracking began in November 2011.

The findings were reported by Ellie Mae Inc. and based on a 44 percent sampling of closed loan applications that were run through its Encompass360 system and the Ellie Mae Network. The Pleasanton, Calif.-based company claims that 20 percent of all home loans originated last year were processed through Encompass360.

On refinances, the closing rate climbed to 54.6 percent from 52.6 percent in January. The ratio for purchase financing rose to 61.7 percent from 60.8 percent.

For the second month in a row, the time to close a loan fell. It took 50 days to close a home loan in February, down from 54 days the prior month. But turnaround was still slower than the same month in the prior year, when it took 44 days to process and close a loan.

Refinance turn times sped up to 51 days from 55 days in January, while purchase turnaround dropped to 47 days from 51 days.

Refinance share fell to 68 percent from 73 percent in January. Refinance share was little changed from 67 percent in February 2012.

Lenders eased up on underwriting last month, with the average FICO score on closed loans dropping to 745 from 749 in the first month of this year. FICO scores have been reduced from 750 in the same month during 2012.

It was the same story for denied loan applications, with the average FICO score reduced to 705 from 707. But borrowers who were denied in February of last year had an average score of just 699.

Similarly, the average loan-to-value ratio rose to 80 percent from 79 percent in January and 76 percent a year prior. The average LTV ratio on denied applications was unchanged at 85 percent but was up from 83 percent in February 2012.

Ellie Mae President and Chief Operating Officer Jonathan Corr suggested that “that the credit box may be expanding.”

At 23/35 percent, average debt-to-income ratios on funded loans were little changed, creeping up from 23/34 percent a month earlier and a year earlier. DTI ratios slipped to 27/43 percent from 27/44 percent in January on denied applications.

While the share of originations insured by the Federal Housing Administration rose to 20 percent last month from 18 percent, it was off from a quarter a year earlier.

A slightly larger share of borrowers went with an adjustable-rate mortgage last month, with ARM share inching up to 2.3 percent from 2.1 percent. ARM share was 4.3 percent in the year-earlier period.

Fifteen-year share slipped to 16.8 percent from 16.9 percent in January and was down from 19.6 percent in the same month last year.

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