Home lenders have continued to loosen their standards compared to a year ago as turnaround has improved over the period. Refinance share was the widest it’s been 10 months.
Conventional mortgages accounted for 66 percent of all residential loans closed during December. The share was the same as it was in the final month of 2016.
Mortgages that were insured by the Federal Housing Administration made up one-fifth of last month’s originations, also no different than in December 2016.
But the share of loans guaranteed by the Department of Veterans Affairs has widened to 10 percent from 9 percent a year previous.
Ellie Mae Inc. delivered the details in its December 2017 Origination Insight Report.
Out of all loan applications initiated in the previous 90-day cycle, 71.2 percent had closed as of December 2017. The closing rate was better than 70.9 percent a month earlier but not as good as 73.2 percent a year earlier.
The month-over-month improvement was likely due “to last-minute efforts by borrowers to close loans before the tax changes took effect,” Ellie Mae President and Chief Executive Officer Jonathan Corr explained in the report.
Last month’s closing rate was 65.6 percent on refinances and 76.1 percent on purchases. The rate was 71.9 percent on conventional mortgages, 69.0 percent on FHA loans and 66.7 percent on VA transactions.
The average home loan took 44 days to close last month, a day longer than in November but six days faster than in December 2016. Refinance time to close was 41 days, and purchase time tables were 46 days. Conventional turnaround was 43 days, FHA time to close was 46 days, and VA speed was 48 days.
Ellie revealed that average FICO scores were unchanged from November at 722 but have fallen four points from a year ago. Conventional credit scores averaged 730 on refinances and 751 on purchases, while FHA scores were 645 on refinances and 680 on purchases. On VA mortgages, refinance scores were 698, and purchase scores were 708.
Loan-to-value ratios averaged 79 percent, the same as the prior month but up from 78 percent a year prior. LTV ratios were 65 percent on conventional refinances and 80 percent on conventional purchases. On FHA closings, LTV ratios were 77 percent on refinances and 96 percent on purchases, while VA ratios were 89 percent on refinances and 98 percent on purchases.
December 2017’s average debt-to-income ratios were 25/39 percent, unchanged from the preceding month but higher than 25/38 percent in the final month of the preceding year. Conventional transactions had ratios of 25/39 percent on refinances and 24/36 on purchases. DTI ratios were 29/48 percent on FHA refinances and 28/43 percent on FHA purchases. VA closings had DTI ratios of 26/42 percent on both refinances and purchases.
The report indicated that refinance share was 40 percent — its widest level since it was 43 percent in February 2017.
“As we closed out 2017 we saw an increase in the percentage of refinances due to seasonality as fewer purchases take place in the fourth quarter, and likely homebuyers were taking advantage of the mortgage deductibility limit before it decreased to $750,000 on December 15th,” Corr said.
The prior month’s refinance share was 39 percent, while it was 46 percent in December 2016. Last month’s conventional refinance share was 47 percent, while the proportion was a quarter on FHA transactions and 31 percent on VA mortgages.
