Increase in Mortgage Closing Rate, Refi Share

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As refinances took up a bigger share of monthly mortgage production, the ratio of loans that closed improved. While average credit scores eased, other metrics used to determine credit quality were unchanged.

Sixty-eight percent of loans closed in October were conventional mortgages. Another fifth were insured by the Federal Housing Administration, and 9 percent were guaranteed by the Department of Veterans Affairs.

There was no change to
the share by loan type when compared to one month previous. But conventional share has expanded from 64 percent one year previous, while FHA share was reduced from 23 percent.

Ellie Mae Inc. provided the metrics and more as part of its October 2016 Origination Insight Report. The mortgage technology service provider mined the data from a 75 percent sampling of mortgage applications processed through its Encompass origination platform.

Last month’s closing rate, which is based on the percentage of loan applications started in the previous 90-day cycle that have closed, was 73.0 percent. The rate improved from 71.8 percent a month earlier and 66.8 percent a year earlier.

The closing rate was 68.0 percent on refinances and 77.2 percent on purchase financing. The conventional closing rate was 72.3 percent, while it was 70.0 percent on FHA mortgages and two-thirds on VA loans.

It took 48 days to close the average home loan last month. Turnaround was the same as in September but slower than 46 days in October 2015.

Time to close in October 2016 was 50 days on refinances and 46 days on purchase-money mortgages. Conventional and FHA turnaround each averaged 48 days, and VA turnaround was 52 days.

The average FICO score for October 2016 production was 730. Average credit scores dipped a point from the prior month but were eight points higher than a year prior.

On refinances, FICO scores on conventional mortgages were 745, FHA scores averaged 653, and VA scores came in at 713.

Scores on purchase financing transactions averaged 753 on conventional loans, 686 on FHA mortgages
and 707 on VA originations.

At 78 percent, there was no month-over-month change in the average loan-to-value ratio. But average LTV ratios were more restrictive than 80 percent the same month in 2015.

LTV ratios on refinances averaged 66 percent on conventional loans, 79 percent on FHA transactions and 88 percent on VA production.

Purchase-money LTV ratios averaged 80 percent on conventional mortgages, 96 percent on FHA-insured closings
and 98 percent on VA-guaranteed fundings.

Ellie reported the average debt-to-income ratio at 24/37 percent, unchanged for two months. The average DTI ratio tightened from 25/39 percent one year previous.

DTI ratios on mortgage refinances averaged 24/36 percent on conventional production, 28/45 percent on FHA originations and 24/39 percent on VA activity.

On purchase financing, conventional DTI ratios averaged 23/34 percent, FHA ratios averaged 28/42 percent, and VA ratios were 24/40 percent.

Refinance share widened to 47 percent from 45 percent a month earlier and 44 percent a year earlier. Refinance share last month was 57 percent on conventional mortgages, 21 percent on FHA loans and 31 percent on VA transactions.

Mortgage Expert

Mortgage Daily Staff



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