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Mortgage Processing Turnaround Slows

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Mortgage Daily

                                                 October 19, 2016

As the monthly share of mortgage originations that were for refinances expanded last month, the length of time that it took to process and close a residential loan increased.

Of all home loans that were originated in September, sixty-eight percent were conventional mortgages. Conventional share widened from 64 percent the same month in 2015.

The share of closings that were insured by the Federal Housing Administration worked out to a fifth last month. FHA share diminished from 23 percent in September 2015.

Another 9 percent of September 2016’s fundings were guaranteed by the Department of Veterans Affairs, the same share as one year previous.

Ellie Mae Inc. delivered the data along with a multitude of other mortgage metrics in its September 2016 Origination Insight Report. The technology provider harvested the statistics from a sampling of approximately
three-quarters of all mortgage applications initiated on its Encompass origination platform.

From application to closing, last month’s closed loans spent 48 days in process, two days longer than in August and in September 2015. Days to close was 50 on refinances and 47 on purchases during the latest month.

September 2016 turnaround was 48 days on conventional mortgages, 49 days on FHA loans and 51 days on VA mortgages.

Out of all applications started in the previous 90-day cycle, 71.8 percent had closed as of last month. The closing rate deteriorated from 72.3 percent a month earlier but was stronger than 66.8 percent a year earlier.

On just refinances, the closing rate was 66.4 percent last month, while it was 76.4 percent on purchase financing.

September 2016’s closing rate came in at 72.1 percent for conventional production, 69.8 percent on FHA fundings and two-thirds on VA originations.

The typical loan closed last month had an average FICO score of 731, no different than in August. But the average FICO score has tightened considerably from 723 in September 2015.

Average scores on conventional mortgages were 747 for refinances and 754 for purchase financing, while FHA scores were 654 on refinances and 686 on purchases, and VA scores averaged 712 for refinance loans and 708 for purchase-money loans.

Loan-to-value ratios on all loans averaged 78 percent in September of this year, more restrictive than 79 percent the prior month and 80 percent a year prior.

Conventional LTV ratios averaged 67 percent on refinancings and 80 percent on purchase transactions. FHA LTV ratios averaged 79 percent on refinance transactions and 96 percent on purchase-money loans. LTV ratios on VA loans were 87 percent on refinancings and 98 percent on purchase financing.

While there was no month-over-month change in the overall average 24/37 percent debt-to-income ratio, DTI ratios have tightened from 25/38 percent in the same month last year.

The average DTI ratio on conventional mortgages was 24/36 percent for refinance loans and 23/34 percent for home purchase financing. FHA loans had average DTI ratios of 28/45 percent on refinances and 27/42 percent on purchases. VA refinances had an average 24/40 percent DTI ratio, and VA purchases had a 24/40 percent ratio.

Refinance share for all originations widened to 45 percent from 43 percent in August and 42 percent in September of last year. Last month’s conventional refinance share was 56 percent, while FHA originations had a 19 percent share, and VA refinance share was 27 percent.

Four percent of September 2016’s volume were adjustable-rate mortgages. ARM share has thinned from 5.3 percent the same month last year.

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