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Mortgage Credit Tightens, FHA Loses Share to VA

Mortgage News

Over the past year, there has been a shift in mortgage market share among government programs. Meanwhile, credit conditions contracted from the previous month.

Conventional residential loans accounted for 64 percent of all mortgages that were closed during June 2017, unchanged from the same month last year.

Another 22 percent of loans funded last month were insured by the Federal Housing Administration, and a 10th were guaranteed by the Department of Veterans Affairs.

FHA has given up market share to VA since one year prior, when FHA share came in at 23 percent, and VA share worked out to 9 percent.

Ellie Mae Inc. provided the details in its June 2017 Origination Insight Report. The statistics reportedly reflect an 80 percent sampling of all applications initiated on Ellie’s Encompass platform.

Last month’s closing rate was 70.3 percent, slightly worse than 70.4 percent the previous period but modestly better than 69.6 percent the same month the previous year. The refinance closing rate was 63.5 percent, and the purchase ratio was 75.1 percent. The closing rate was 70.6 percent on conventional transactions, 69.2 percent on FHA closings and 67.3 percent on VA mortgages.

From application to closing was 43 days in June 2017, a day longer than a month earlier and three days faster than a year earlier. Refinances took 41 days, and purchases were 43 days. Conventional time to close was 42 days, FHA turnaround was 43 days, and the VA closing process took 46 days.

Although average FICO scores tightened to 724 from 723 in May, they were still looser than 726 in June 2016. Conventional business had scores that averaged 729 on refinances and 754 on purchases. Credit scores averaged 647 on FHA refinances and 683 on FHA purchases, while VA refinances averaged 701 and VA purchases were 711.

At 80 percent, average loan-to-value ratios were no different than the previous month but slightly more restrictive than 81 percent the same month in 2016. Conventional refinances had an average 65 percent LTV ratio, and the ratio was 80 percent on purchase-money mortgages. On FHA loans, LTV ratios were 78 percent on refinances and 96 percent on purchase financing. Refinances of VA loans had average LTV ratios of 88 percent, and purchase-money VA loans averaged 98 percent.

Ellie reported average debt-to-income ratios of 25/38 percent, a little tighter than 25/39 percent in the previous report but more relaxed versus 24/38 percent twelve months earlier. Conventional DTI ratios averaged 25/39 percent on refinances and 23/35 percent on purchases.
For FHA transactions, DTIs were 29/46 percent on refinancings and 28/43 percent on purchases. DTIs averaged 25/41 percent on VA mortgages.

Out of all the home loans that were closed last month, 32 percent were refinances, the same share as in May and thinning from 34 percent this month last year. Refinance share was 37 percent on conventional loans, 19 percent on FHA mortgages and a quarter on VA transactions.

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