Fifty-eight percent of mortgages that closed in July were loans for the purpose of refinancing, up from 54 percent in June according to Ellie Mae’s Origination Insight Report released today. Conventional mortgages made up 67 percent of the mortgages originated through Ellie Mae and FHA loans accounted for 24 percent.
The Origination Insight report is based on a sample of loan originations that flow through Ellie Mae’s mortgage management software and network and represent more than 20 percent of U.S. mortgage originations. The company began issuing its report in August of 2011 so for the first time annual information is available.
The vast majority of loans were 30 year fixed-rate mortgages (FRM) with 15-year FRM taking a 15.3 percent market share and adjustable rate mortgages (ARMs) only 3.1 percent. The average rate on a 30-year FRM that closed during the month was 3.87 percent compared to 3.99 percent in June and 4.64 percent in August 2011.
It took loans an average of 48 days from application to close in July, a number that has inched up slowly over the last few months. There was little difference in the time required to close a refinance loan and a loan for the purpose of purchasing. Jonathan Corr, chief operating officer of Ellie Mae said, “The combination of extremely low interest rates and a strengthening purchase market pushed out closing times for both refinance and purchase loans in July. These time frames are similar to what we saw in January of last year, when a surge of activity challenged the industry’s capacity.”
To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the April applications) to calculate a closing rate for July. Ellie Mae found that 45.8% of all applications closed in July 2012 compared to 46.2% in June 2012.
A typical loans closed during the period had a borrower FICO score of 748, debt to income (DTI) ratio of 23/34 and a loan to value of 80 percent. With the exception of the LTV which has increased by one percentage points, the quality standards are higher than a year ago when the typical FICO was 741 and the DTI was 25/36. Loans for which the applications were denied typically had an LTV of 85 (compared to 82 percent a year earlier) and a 710 FICO score and 28/44 DTI. The last two are again higher than a year ago when the typical FICO was 696 and the DTI was 29/45.
Conventional loans with LTV’s above 95 percent declined for the second straight month. Corr said this might indicate that HARP 2.0 activity is slowing, something that is not borne out by data from Freddie Mac and Fannie Mae.