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Mortgage Lenders Continue Easing Approval Requirements

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For much of this year, mortgage lenders have been loosening their lending standards. On government-insured refinances, average credit scores have tumbled nine points over the past year.

Loan closings took an average of 46 days in April, the same as the prior month. It took a day longer to close a mortgage than it did in the same month last year.

Refinance turnaround was 47 days last month, while the number of days it took to close the average purchase financing transaction was 44 days.

Ellie Mae Inc. reported the operational data on Wednesday. The findings are based on a 44 percent sampling of applications that flow through the Pleasanton, Calif.-based company’s Ellie Mae Network and Encompass360 mortgage management software — which was reportedly used on 20 percent of all U.S. originations last year.

Just over 53 percent of loans started 90 days earlier closed in April. The closing rate deteriorated from the previous month’s 55 percent but was better than just 48 percent in the year-earlier period.

April’s closing rate for refinances was 51 percent, and the purchase financing closing rate was 58 percent.

Average FICO scores have been on the decline, falling to 742 from 743 in March and 745 in April 2012. FICO scores have fallen each of the last three months and were lower in April than any time since Ellie began reporting the numbers.

On denied loans, the average credit score has been down for four consecutive months and landed at 701 in April. Average scores were one point lower than the same month in 2012.

On loans insured by the Federal Housing Administration, the average FICO score has tumbled to 711 from 720 in April 2012.

There was no change in the average loan-to-value ratio, which was 81 percent for all closings — though LTVs crept up from 80 percent one year prior.

Average LTVs on denied loans were 85 percent, unchanged during the past three months but lower than 87 percent a year prior.

At 23/35, average debt-to-income ratios were the same as in March. The average DTI ratio was lower, however, than 24/35 in April 2012.

On loan applications that were denied, the average DTI was 28/45, a little higher than 27/44 in the previous month and 28/43 in the same month during the previous year.

Refinance share was 58 percent last month, falling for the third month in a row and down from 62 percent in March. But refinances accounted for a bigger share than the 56 percent in April 2012.

The Federal Housing Administration insured 22 percent of April production. FHA share inched up from 21 percent a month earlier and has been higher for three consecutive months. But FHA share slid from 28 percent in April 2012.

Just 3.2 percent of borrowers opted for an adjustable-rate mortgage in the latest report, increasing from March’s 2.5 percent ARM share but less than the 5.1 percent share 12 months prior.

Borrowers opted for 15-year mortgages 15.3 percent of the time in April. The share of 15-year mortgages was lower than 15.9 percent a month earlier and 18.4 percent a year earlier.

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