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Mortgage Market Conditions Worsen

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Home-loan closing rates diminished last month, while turnaround deteriorated. Lenders tightened up on credit scores and debt ratios, though loan-to-value ratios inched higher.

Sixty-three percent of all the residential loans originated in the country during May were classified as conventional mortgages.

Nearly a quarter of last month’s production was insured by the Federal Housing Administration, and a tenth were guaranteed by the Department of Veterans Affairs.

These details and more were spelled out in the Origination Insight Report from Ellie Mae Inc.

Out of all the mortgage applications started in the previous 90-day cycle, 64.0 percent closed in May.

The closing rate slipped from 65.2 percent in the last report but rose from 57.8 percent in the year-earlier report.

Last month’s closing rate was 60.1 percent on refinances and 68.2 percent on purchase financing.

May 2015’s closing rate was 64.3 percent on conventional mortgages, 57.1 percent on FHA-insured loans and 62.9 percent on VA-guaranteed originations.

Home loans closed in May took 46 days to process, a day longer than in the prior month. Turnaround was six days longer than in May 2014.

Refinances took 49 days to close during the most-recent month, and purchase financing turnaround was 43 days.

Last month’s time to close was 46 days on conventional mortgages, 45 days on FHA-insured loans and 46 days on VA-guaranteed mortgages.

Average FICO scores on May 2015 originations rose one point to 730. Credit scores were up three points from the same month in 2014.

Credit scores on conventional refinances were 738, while scores on conventional purchases were 757.

FHA credit scores in May were 683 on refinances and 688 on purchase financing.

Refinances guaranteed by the VA had average credit scores of 713, while purchase financing scores averaged 708.

The average LTV ratio for all loans nudged up to 81 percent from the previous month’s 80 percent but was down from 82 percent 12 months prior.

Conventional refinances in May had an average LTV ratio of 70 percent, while the ratio was 81 percent on purchases.

LTV ratios on FHA refinance transactions were 84 percent, and FHA purchase transactions had an average 95 percent LTV ratio.

VA refinances had average LTV ratios of 88 percent, and the ratio was 98 percent on loans used to purchase homes.

Debt-to-income ratios on all originations tightened to 24/37 percent from 24/38 percent in April but didn’t change from May 2014.

Ellie reported that May 2015’s conventional DTI ratios were 24/38 percent on refinances and 22/34 percent on purchases.

On FHA production, DTI ratios averaged 26/41 percent on refinances and 27/41 percent on purchase-money loans.

DTI ratios on VA mortgages averaged 24/39 percent on refinances and 24/40 percent on purchases.

Out of all originations last month, 42 percent were refinances. Refinance share fell from 47 percent a month earlier but increased from a third a year earlier.

May 2015’s refinance share exceeded half on conventional loans, while it was less than a quarter on FHA mortgages. VA refinance share was 29 percent.

Adjustable-rate mortgages represented 4.7 percent of last month’s business. ARM share inched up from 4.5 percent in April but sank from 7.6 percent in May of the previous year.

ARM share during May was 5.8 percent on conventional loans, 0.7 percent on FHA loans and 0.4 percent on VA mortgages.

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