As Rates Rise, Origination Trends Toward Looser Credit

Ellie Mae reported today that the refinancing sharernof loans has dropped 15 percentage points since rates first began to escalaternin May.  The company’s August Origination Insight Report shows that 43rnpercent of August’s closed loans were for refinancing compared to 47 percent inrnJuly and 58 percent in both April and May.  Refinancing accounted for a 62 percent sharernof all closed loans in 2012.</p

Seventy percent of closed loans were financedrnconventionally, down from 72 percent in both July and July.  FHA lending accounted for 18 percent ofrnclosings compared to 19 percent in each of the three previous months.  The average conventional share in 2012 was 69rnpercent and the average FHA share was 23 percent.  </p

The average FICO score for closed loans dropped torn734 in August, the lowest level since Ellie Mae began tracking them and bothrnloan-to-value (LTV) and debt-to-income (DTI) ratios rose slightly.  Jonathan Corr, president and chief operatingrnofficer of Ellie Mae said this indicates a continuation of the credit easingrntrend.</p

Corr continued, “Purchase loans continued to gainrnshare in August, climbing 4 percent to 57 percent of all loans.  This was the highest percentage of purchasernloans since we began tracking this data in August 2011.</p

“HARP-related high LTV refinances (95 percent orrnmore) continued their resurgence, moving up from 11.1 percent in July to 13.4rnpercent in August,” he added.</p

The time required to close a loan, regardless ofrnpurpose, fell significantly from July to August.  It took an average of 41 days to close a loanrnfor refinancing and 42 for a purchase money mortgage compared to 48 days and 46rndays respectively in July.  During thernlast three months of 2012 loans for refinancing were taking well over 50 daysrnto close.  </p

Ellie Mae compiles a lender “pull-through” rate byrnreviewing a simple of loan applications initiated 90 days prior to calculate anrnoverall closing rate.  The rate in Augustrnwas 53.1 percent, down from 55.4 percent in July.  The closing rate for purchase mortgages wasrnessentially unchanged from July at 61.5 percent, however the closing rate forrnrefinances dropped from 51.3 percent in July to 46.8 percent.</p

Ellie Mae draws its data from a sample of thernapproximately 20 percent of all U.S. loan applications that flow through itsrnmortgage management software and network. rn

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