Mortgage Credit More Flexible Than Year Ago

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MORTGAGE EXPERT
12 · 20 · 17

Compared to a year ago, average credit scores have declined, average loan-to-value ratios have increased and average debt-to-income ratios have risen. Closing ratios have deteriorated, but turnaround was faster.

Conventional loans made up two-thirds of mortgages closed in November, a fifth were mortgages insured by the Federal Housing Administration, and a 10th were guaranteed by the Department of Veterans Affairs.

While
there was no change in the share from the previous month, there was a shift from the same month in 2016, when conventional share was wider at 68 percent, and VA share was thinner at 9 percent.

The statistics were disclosed by Ellie Mae Inc. in its November 2017 Origination Insight Report based on
an 80 percent sampling of applications processed through Encompass.

Last month’s closing rate was 70.9 percent, a little better than 70.4 percent a month earlier and worse than 72.2 percent a year earlier. The refinance closing rate was 65.1 percent, and purchase transactions had a 75.5 percent closing rate.

Of all conventional mortgages started in the prior 90-day cycle, 71.6 percent had closed last month.
The closing rate was 68.4 percent on FHA transactions and 66.3 percent on VA mortgages.

Loans closed last month took an average 43 days to close, no different than in October but six days faster than in November 2016.
Refinance turnaround was 40 days, and purchases had a time table of 45 days. Conventional time to close was 42 days, FHA loans took 45 days and VA turnaround was 47 days.

FICO scores averaged 722 in November, two points lower than a month earlier and six points less than a year earlier. At 730, conventional refinance credit scores were lower than 751 on purchases FHA credit scores were 645 on refinances and 681 on purchases. On VA transactions, scores were 700 on refinances and 709 on purchases.

Although refinance share was unchanged from October at 39 percent, it has thinned from 47 percent the same month last year.
The share was 45 percent on conventional loans, 24 percent on FHA mortgages and 31 percent on VA transactions.

“We saw FICO scores drop modestly, especially across refinances, indicating that lenders may be loosening credit standards to attract the dwindling refinance market,” Ellie Mae President and Chief Executive Officer Jonathan Corr noted in an accompanying statement.

The 79 percent average LTV ratio last month was the same as in the last report and a little higher than 78 percent in the same month last year. LTV ratios averaged 65 percent on conventional refinances and 80 percent on conventional purchases, while the ratio was 77 percent on FHA refinances and 96 percent on FHA purchases. VA closings had average LTV ratios of 89 percent on refinances and 98 percent on purchases.

No month-over-month change left the average DTI ratio at 25/39 percent, though the ratio stretched from 24/38 percent in the report from a year ago.
Conventional DTI ratios averaged 25/39 percent on refinances and 24/36 percent on purchases. FHA refinances had an average ratio of 30/49 percent, and FHA purchases had a ratio of 28/43 percent. For all VA closings, the average DTI was 26/42 percent.

Mortgage Expert

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