As the share of conventional business has grown at the expense of government-insured business over the past year, lending risk tightened and refinance share fell to a new low.
Two-thirds of all single-family loans closed during May were conventional mortgages. Conventional share has widened from 63 percent in the same month a year ago.
Loans insured by the Federal Housing Administration accounted for a fifth of all loans. FHA share was more narrow than 23 percent in May 2017.
No change left the share of loans guaranteed by the Department of Veterans Affairs at a 10th.
Those details and more were presented in the May 2018 Origination Insight Report from Ellie Mae Inc.
The report said that of all loan applications initiated during the preceding 90-day period, 70.2 percent had closed as of May 2018. The closing rate improved from 69.5 percent the prior month but wasn’t as good as 70.4 percent a year prior.
Refinance closing rates were 65.0 percent, while the rate was higher for purchase-money transactions: three-quarters. Conventional conversions came to 69.3 percent, while the FHA closing rate was 67.3
percent, and the VA rate was 65.2 percent.
Home lenders took 41 days to close a mortgage last month, the same as in April and a day faster than in May 2017. Refinances took 37 days to close, and purchases took 43 days. Turnaround was 40 days on conventional transactions, 42 days on FHA mortgages and 45 days on VA loans.
FICO scores averaged 724 last month, a point higher than in the last report and in the year-earlier report. Scores averaged 725 on conventional refinances and 753 on conventional purchases, while FHA scores were 649 on refinances and 676 on purchases. VA refinance scores averaged 692, and VA purchase scores averaged 709.
No change left the average loan-to-value ratio at 79 percent, though it was down from 80 percent in May 2017. Average conventional LTV ratios were 63 percent on refinances and 81 percent on purchases. On FHA closings, ratios were 77 percent for refinances and 95 percent for purchases, and on VA mortgages, ratios were 89 percent for refinances and 98 percent for purchases.
But despite tightening in two of the three credit metrics covered by Ellie, average debt-to-income ratios of 26/39 percent were the same as in April and looser than 25/39 percent twelve months earlier. DTI ratios on conventional transactions were 26/40 percent on refinances and 24/36 percent on purchases. The ratio on FHA fundings was 30/47 percent for refinances and 29/44 percent for purchases. VA refinances had an average DTI ratio of 27/42 percent for refinances and 27/43 percent for purchases.
Ellie reported refinance share of 30 percent — the thinnest it’s been based on the oldest available data reported by the Pleasanton, California-based company dating back to August 2011 when it was 61 percent. Refinance share was 34 percent in April and 32 percent in May 2017. Conventional refinance share was 34 percent, while it was a fifth on FHA loans and a quarter on VA loans.
Last month’s diminished refinance share is the result of the highest mortgage rates ever tracked by Ellie.
