Mortgage Closing Rate Deteriorates

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10 · 23 · 14

Loan originators closed a smaller share of loan applications last month. Refinances fared worse then purchase transactions.

Of all the home loan applications initiated in the previous 90-day cycle, 58.1 percent of them closed in September.

The closing rate worsened from 61.1 percent the previous month but was up from 52.3 percent in the same month last year.

Ellie Mae Inc. reported the numbers, which were derived from a 57 percent sampling of loan applications initiated on its Encompass origination platform.

The closing rate was 48.3 percent on refinancing and 64.3 percent on purchase financing.

On conventional mortgages, the closing rate was 58.2 percent. Loans insured by the Federal Housing Administration had a 54.6 percent closing rate, and Department of Veterans Affairs-guaranteed loans had a 60.0 percent rate..

The average loan took 41 days to close during September. Turnaround lengthened from 39 days a month earlier but was one day shorter than a year earlier.

Last month’s refinance turnaround was 40 days versus 41 days for purchase transactions.

The time to close conventional loans was 39 days, FHA loans took 42 days, and VA mortgages took 41 days.

September’s average FICO score was 726, off a point from the previous month and 6 points less than one year prior.

On conventional refinances, average scores were 732, while they were 755 on purchases. Credit scores averaged 676 on FHA refinances and 682 on FHA purchases. Average VA FICO scores were 702 on refinances and 705 on VA purchases.

At 82 percent, the average loan-to-value ratio hasn’t changed all year. Average LTVs were 81 percent in September 2013.

On purchase transactions, the average LTV ratio was 80 percent on conventional loans, 95 percent on FHA mortgages and 98 percent on VA loans.

Ellie said the average debt-to-income ratio was 24/37 percent for all loans, the same as in August but off from 25/37 percent in September of last year.

Conventional loans represented 64 percent of last month’s business, while FHA loans made up 19 percent and VA loans accounted for 12 percent.

Borrowers who elected to take an adjustable-rate mortgage made up 6.3 percent of September’s borrowers. Fifteen-year share was 9.1 percent.

Refinances represented 36 percent of September originations, climbing from a third in the previous report but down from 42 percent in the year-earlier report.


Mortgage Daily Staff


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