"Mega-Lenders" Lagging Smaller Ones in Processing Time

Small and medium-sized lenders and community banks appear to be closing loans for refinancing faster than their “mega-lender” counterparts according to the Origination Insight Report for April released Wednesday by Ellie Mae.  The company, which samples loan applications that are processed through its loan management software, reported that, “While the average refinance going through our platform took five days longer in April than in March, it still only took 47 days.”  Ellie Mae contrasted this to a report from The Wall Street Journal  which recently said that the largest retail lenders are now quoting timelines as long as 60 to 90 days for refinancing.  </p

Insight, which covers approximately 20 percent of U.S. loan originations, reported that the share of refinance applications actually dropped in April to 56 percent from 61 percent.  FHA Loans made up 28 percent of applications, unchanged from March and conventional loans 62 percent down from 64 percent.</p

Jonathan Corr, chief operating officer, said, “As we move into the spring and summer buying season, there was a significant pick up in the percentage of purchase loans; 44 percent in April up from 39 percent in March.  This is the highest level of purchase loans activity in the last nine months.”</p

The closing rate (defined as the applications received in the preceding 90 days that have closed) or “pull-through” rate for all loans in April was 48.1 percent, up from 46.9 percent in March.  For refinancing the rate was 44.7, up from 42.1 percent while the purchase rate was down from 56.4 percent to 55.2 percent.</p

The average loan that closed during April had a loan-to-value ratio (LTV) of 80, a FICO score of 745 and a debt-to-income ratio (DTI) of 24/35 compared to an LTV of 77, FICO of 749, and DTI of 23/45 in March. Applications that were denied had an average FICO score of 702, LTV of 87, and DTI of 23/43.  These numbers were all up slightly from the previous month.</p

There was very little difference between loan quality metrics for purchasing and refinancing with a convention loan, but the differences in FHA loans were significant.  The average FICO for refinancing into an FHA loan was 720 compared to 702 for a purchase.  The LTV was 87 versus 96, and the DTI was 26/39 compared to 27/41.</p

Loans that closed with an LTV over 95 percent represented 7.1 percent of conventional refis, up from 3.6 percent in March,  Corr said, “This has been slowly increasing since the HARP 2.0 announcement in October 2011, but correspondent lenders have only recently been able to run these loans through Desktop Underwriter and Loan Prospector.”

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