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Lenders Take More Risk on New Originations

Mortgage News

Credit scores decreased on mortgages closed last month, while loan-to-value ratios increased. Even debt-to-income ratios rose despite that the share of 15-year loans was lower and the share of adjustable-rate mortgages was higher.

It took 45 days to close a residential loan during April, longer than the 42-day turnaround during the previous month. Refinances took 47 days, and purchase transactions took 43 days.

Of all loan applications started within the prior 90 days, 48 percent closed last month. The closing rate inched up from 47 percent in March.

Mortgage technology provider Ellie Mae detailed the data in its Origination Insight Report for April 2012. The findings were harvested from a sampling of one-third of loan applications initiated through the company’s Encompass origination platform. Ellie reports that 2 million U.S. mortgages were handled last year through Encompass360 mortgage management software.

Lenders took more risk last month.

April’s average FICO score on closed loans drifted down to 745 from the prior month’s 749, while the average LTV ratio climbed to 80 percent from 77 percent and the average DTI ratio edged up to 24/35 from 23/35.

Ellie said the average FICO on denied applications increased to 702 from 699. But the average LTV on denied loans rose to 87 percent from 85 percent and the average DTI ratio also increased, to 28/43 from 27/43.

Refinances accounted for 56 percent of originations last month, falling from 61 percent in the previous report.

The share of closings that were insured by the Federal Housing Administration was unchanged at 28 percent.

ARMs made up 5.1 percent of April business, rising from a 4.2 percent ARM share. Fifteen-year share eased to 18 percent from March’s 20 percent.

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