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Record High Closing Rate on Home Loans

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The closing rate on mortgage transactions reached two thirds last month — the best it’s ever been since the data became available.

The conventional share of residential loan originations during July was 62 percent, diminishing from 63 percent in the previous month and 64 percent in the same month last year.

Mortgages insured by the Federal Housing Administration made up another 24 percent of monthly production, the same as in June and more than the 20 percent in July 2014.

Another 10 percent of last month’s business were loans guaranteed by the Department of Veterans Affairs. VA share was the same a month earlier and 11 percent a year earlier.

The characteristics were derived from a two-thirds sampling of loans processed through the technology platforms of Ellie Mae Inc., which reported the data in the Origination Insight Report. Ellie Mae’s Encompass mortgage management solution reportedly handled 3.7 million loan applications last year.

Out of all applications started in the previous 90-day cycle, 66.2 percent closed in July.

That was the highest closing rate on record based on the oldest available Ellie Mae data going back to August 2011.

The closing rate improved from 64.2 percent in the previous report and 57.7 percent in the year-earlier report.

Last month’s closing rate fell to 60.2 percent on refinances and jumped to 70.7 percent on purchase financing.

Conventional loans had a 66.1 percent closing rate, while the FHA rate was 58.2 percent and the VA rate
was 63.5 percent.

It took 48 days for July’s originations to close, the same turnaround as in the previous month but much longer than the 37 days it took in the same month during 2014.

Refinances took 52 days in the latest period, and purchases took 45 days.

Conventional and FHA turnaround was 47 days,
while the VA time table was longer at 49 days.

Last month’s borrowers had an average FICO score of 725. The latest score indicates tightening from June and from July 2014 — when the average score was 727.

“The average FICO score on closed loans fell for the third consecutive month to 725, its lowest level since February 2014,” an accompanying news release stated.

Average scores for July 2015 rose to 727 on conventional refinance borrowers and jumped to 757 for conventional borrowers on purchase transactions.

FHA credit scores averaged 660 on refinances and 689 on purchases.
On VA mortgages, credit scores were 708 on refinances and 709 on purchases.

Ellie reported average loan-to-value ratios at 81 percent, the same as in June but tighter than the 82 percent in the same month last year.

On conventional refinance transactions, LTV ratios were 70 percent, while they were 80 percent on conventional purchase transactions.

The average LTV ratio on FHA refinances was 81 percent, although it shot up to 96 percent on purchase financing.

VA LTV ratios were 88 percent on loans to refinance a mortgage and 98 percent on loans to finance a home purchase.

The average debt-to-income ratio eased to 25/38 percent from 24/38 in the last report and 24/37 percent twelve months prior.

DTI ratios average 25/40 on conventional refinances and 23/34 on conventional purchases.

FHA DTI ratios were 28/45 percent refinancing and 28/41 percent on purchase financing.

VA DTI ratios averaged 24/40 percent on all transaction types.

Refinance share fell to 36 percent from 38 percent in June but was wider than less than a third in July 2014. Refinance share rose to 45 percent on conventional loans, fell to 17 percent on FHA-insured loans and was less than a quarter on VA-guaranteed mortgages.

Adjustable-rate mortgages made up 5.5 percent of July originations. ARM share widened from 4.9 percent a month airier but thinned from 6.5 percent twelve months earlier.

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