Credit Scores Fall, Though LTVs Tighten

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Credit scores on monthly residential loan closings increased — with average credit scores dropping to the lowest level in at least four years. But average loan-to-value ratios have tightened up.

Of all loans closed in September, 64 percent were conventional. Another 23 percent were insured by the Federal Housing Administration, and nine percent were guaranteed by the Department of Veterans Affairs.

While conventional share edged up a percentage point from the previous month, the share for both FHA-insured
and VA-guaranteed transactions each inched down a single percentage point compared to August.

Ellie Mae Inc. reported the statistics as part of its Origination Insight Report September 2015 that was created based on a two-thirds sampling of applications initiated on the Encompass origination platform.

Of all loan applications started in the previous 90-day cycle,
66.8 percent had closed by September. The closing rate was nudged up from 66.3 percent a month earlier and was bolstered from 58.1 percent a year earlier.

The closing rate on September 2015’s refinances was 60.1 percent, and purchase financing had a closing rate of 71.0 percent.

On all conventional mortgages, the closing rate exceeded two-thirds. FHA-insured and VA-guaranteed mortgages had a 61.3 percent closing rate.

Loan turnaround was cut to 46 days from 47 days in August. But compared to September 2014, it is taking
five additional days to close a loan.

On refinances, turnaround dropped four days from a month earlier to 46 days. Purchase transactions, however, slowed a day to 46 days.

The time to close conventional mortgages was cut two days from the previous month to 45 days in September. FHA turnaround, meanwhile, increased a day to 47 days, and the VA loan process was unchanged at 48 days.

The average FICO score on all September 2015 production was 723 — a point less than the previous month, three points lower than the year-earlier month
and the lowest since Ellie began reporting such data as of August 2011.

Zeroing in on just conventional refinances, credit scores averaged 728 in September 2015. Conventional purchases had an average 755 credit score.

FHA credit scores were 661 on refinances and 689 on purchases last month, and VA scores were 707 for both types of translations.

For all loan types, the average LTV ratio slipped to 80 percent from 81 percent in August and 82 percent in September 2014.

Average LTV ratios for last month were just 69 percent on conventional refinances and 80 percent on conventional purchases.

LTVs averaged 81 percent on FHA refinances and 96 percent on government-insured purchase financing.

VA refinances had an average 88 percent LTV ratio, but the ratio jumped to 98 percent on VA purchases.

Ellie reported that average debt-to-income ratios were 25/38 percent in the latest period, no different than in the last report but more liberal than 24/37 percent in the report from the same month last year.

On just conventional refinancings, however, average DTI ratios were 25/40 percent in September 2015, while they were just 23/34 percent on conventional purchase financing.

FHA-insured refinances had DTI ratios that averaged 28/45 percent, while the ratio dropped to 28/41 percent on FHA purchase transactions.

For both VA refinancing and purchase financing, DTI ratios averaged 24/40 percent.

Refinance share climbed to 42 percent in September from 37 percent a month earlier and 36 percent a year earlier. September 2015’s refinance share was 52 percent on conventional mortgages, 28 percent on VA loans and just 21 percent on FHA mortgages.


Mortgage Daily Staff


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