FHA Market Share Continues to Ease, Refinancing at Recent Highs

The share of refinancing relative to all mortgage originations increasedrnsharply in January, rising from 69 percent the previous month to 73 percentrnwhile purchase applications hit an historic low.   The information comes from Ellie Mae’s OriginationrnInsight Report and is compiled from the approximately 3 million loan originationsrnutilizing its software and origination management systems.  </p

The refinancing sharernof closed loans in January was the highest since Ellie Mae began producing itsrnreport in August 2011, an increase of 4 percentage points from December.  Purchase applications had a 27 percent marketrnshare, down from 31 percent in December and the lowest in Ellie Mae’s reportingrnhistory.  Purchase applications averagedrna 38 percent share in 2012. </p

FHA loans continued arngradual decent in market share as its counter-cyclical role in the economy continuedrnto decrease.  In August 2011, the firstrnmonth for which Ellie Mae provides data, FHA closed 29 percent of mortgagernloans and it averaged a 23 percent share through 2012.  In January the market share was 18 percent,rndown from 19 percent in December and 25 percent one year earlier.  </p

Conventional loansrnconstituted 74 percent of the market, up from 73 percent in December and 67rnpercent in January 2012.  The average forrn2012 was 69 percent.</p

The time required tornclose a refinancing loan dropped from 57 days in December to 55 days in Januaryrnbut remained unchanged at 51 for home purchase loans.  Refinancing took an average of 49 days inrn2008 and purchasing 46 days.</p

To get a meaningful view ofrnlender “pull-through,” Ellie Mae reviewed a sampling of loan applicationsrninitiated 90 days prior to calculate an overall closing rate of 55.0% inrnJanuary 2013, up slightly from 54.7% in December 2012.  Ellie Mae attributed this to an increase inrnrefinances.</p

“Since last summer,rnthe refinance share has been climbing steadily and in January 2013 it reachedrn73%, the highest level since we began tracking this data in August 2011,” saidrnJonathan Corr, president and chief operating officer of Ellie Mae. “Continuedrnlow interest rates and home-buying seasonality are big reasons for this shift,rnbut so is HARP 2.0 activity. Closed conventional refinances with LTVs ofrn95%-plus ticked up slightly to 11.6% in January 2013 from the previous high ofrn11.4% in December 2012, indicating that more underwater borrowers are beingrnable to refinance thanks to HARP2.0.</p

“The share of FHArnloans versus conventional loans declined to 18% in January 2013, which has beenrna new low since our tracking began.” Corr continued, “This may indicate thatrnhigher premiums and other program changes are making FHA loans lessrnattractive.”</p

Corr also added,rn”Average credit scores for conventional loans in January 2013 were slightlyrnlower compared to the same time last year. rnA year ago, the average credit score was 769 for a conventionalrnrefinance and 763 for a similar purchase. In January 2013, those averagesrndropped to 763 for refinances and 760 for purchases. While the overall creditrnscore requirement remains tight, it appears that we are beginning to see somernloosening.”

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