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Closing Times Reduced

Mortgage News

The time it took to close a loan was cut by two days last month, with purchase financing showing the biggest improvement. The same report indicated that purchase transactions have a far better closing ratio than refinances.

Regardless of whether the transaction was a refinance or a home purchase, it took an average of 42 days to close a home loan during March. That was faster than the 44 days it took the prior month. Turnaround recently peaked in January at 48 days.

The biggest improvement in the time to close was with purchases, which fell from 45 days in February.

The data report is the second from Ellie Mae and reflects one third of transactions processed through Encompass360 and the Ellie Mae Network. The Pleasanton, Calif.-based firm says 12 million loan applications ran through its systems last year and its market share is 20 percent of all originations.

Ellie sampled applications initiated 90 days earlier and found that 47 percent had closed. The closing ratio was 56 percent for purchases, while the ratio for refinances was 42 percent.

The share of closed loans that was insured by the Federal Housing Administration climbed to 28 percent last month from 25 percent in February. FHA share was as high as 29 percent in August 2011.

Refinances accounted for 61 percent of March production, falling from more than two thirds a month earlier.

“The numbers showed a significant pick up in the percentage of purchase loans to 39 percent in March versus 33 percent in February, and a corresponding increase in FHA share: 28 percent of closed loans versus 25 percent in February,” Ellie Mae Chief Operating Officer Jonathan Corr said in the report. “The increase in FHA share was not surprising given FHA originations tend to skew more heavily towards purchase.”

Borrowers opting for an adjustable-rate mortgage accounted for 4.2 percent of all borrowers. ARM share had been as high as 8.3 percent last August.

More borrowers went with a 15-year term, 20.2 percent, than did the prior month, when the 15-year share was 19.6 percent.

On closed loans, FICO scores haven’t recently varied far from the 749 average in March. The average FICO score on denied loans was 699 last month and during February.

For the past seven months, the average loan-to-value ratio on closed loans has teetered between 77 percent and 76 percent. March was 77 percent.

The average LTV ratio on denied loans climbed to 85 percent in March and had been as low as 82 percent during the past six months.

Closed loans had an average debt-to-income ratio of 23/35 in March, while the ratio was 27/43 on denied loans.

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