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Refinance Turn Times Deteriorate

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The amount of time that it takes to close a refinance has been slowing over the past year and now stands considerably longer than for a purchase transaction. The good news is that a bigger share of refinance applications are converting to closed loans. Adjustable-rate share has diminished to almost nothing.

The number of days it took to close a home loan was 54 in October, lengthening from 50 days the prior month. A year previous, it only took 43 days to close a residential mortgage.

While purchase loans have taken 47 days to close each of the last four months, turnaround for refinance transactions slowed to 57 days from 53 days in September and just 42 days in the same month during 2011.

The metrics were spelled out in the Ellie Mae Origination Insight Report October 2012. The activity was determined from a one-third sampling of applications that ran through Ellie Mae’s Encompass360 platform — which reportedly handled 20 percent of all U.S. mortgage originations in 2011 — and the Ellie Mae Network.

Out of all the loan applications taken during the previous 90 days, 54.5 percent closed in October. The closing rate improved from the previous month’s 50.5 percent.

On purchase financing, last month’s closing rate was 61.2 percent, minimally higher than September’s rate. On refinances, October’s closing rate was 51.3 percent — higher than 45.3 percent in the previous report.

Ellie found that that average FICO score on closed loans has been unchanged for three consecutive months at 750 — the same as it was in October 2011. On denied loans, the average score inched up to 706 from 704 in September.

Average loan-to-value ratios on funded business were unchanged from September at 78 percent but were slightly higher than 76 percent a year prior. LTVs on denied applications slipped to 87 percent from 88 percent a month earlier but climbed from 83 percent a year earlier.

Average debt-to-income ratios on closed loans were 23/34 — the same for four consecutive months and the same as in October 2011. On denied loans, average DTI ratios were the same as in September at 27/44.

The share of last month’s loan production that was refinance was 69 percent, wider than 65 percent in September and in October 2011.

Loans insured by the Federal Housing Administration represented 19 percent of October’s activity, the same as a month earlier. FHA share of originations was nearly a quarter in the same month last year.

A mere 2.2 percent of October’s originations were adjustable-rate mortgages, diminishing from 2.6 percent in the prior report. ARM share was 5.2 percent a year earlier.

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