Origination Report: Loan Processing Times on the Rise, Closing Rates Improve in September

Whilernthe time to close a loan increased again in September, lenders are closing arnsignificantly higher portion of loans than they have in earlier monthsrnaccording to the OriginationrnInsight Report released today by ElliernMae.  It is now taking 50 days on averagernto close a loan, a number that has increased steadily in the last year. </p

Sixty-five percent of closed loans inrnSeptember were for the purpose of refinancing compared to 61 percent thernprevious month.  FHA loans accounted torn19 percent of loans originated and conventional loans represented 72 percent.  FHA loans accounted for 24 percent one yearrnago and conventional loans 68 percent.  </p

“In September, the share of conventional loans continued to outpacernFHA loans,” said Jonathan Corr, chief operating officer of Ellie Mae. “Duringrnthe past six months, FHA loans have dropped from 28% to 19% while conventionalrnloans have risen from 64% to 72%. This is mostly likely the result of HARP 2.0rninitiatives as well as increases in FHA insurance premiums that took effect inrnApril 2012.</p

“The percentage of conventional refinancesrnat 95%-plus LTV peaked at 11.0% in May 2012,” Corr said, “and have beenrndrifting down slowly ever since. In September 2012, these loans, which are mostrnlikely HARP 2.0 loans, had leveled off at 7.43%, down from 7.74% in August 2012.</p

While the average closing time for loans inrnSeptember was 50 days it was 53 days for a refinancing compared to 47 days forrna purchase.  One year ago these figuresrnwere 41 days and 39 days respectively.</p

To get a meaningful view of lender “pull-through,”rnEllie Mae reviewed a sampling of loan applications initiated 90 days priorrn(i.e., the June applications) to calculate a closing rate for September 2012,rnwhich was 50.5%, compared to 47.8% in August. rnPurchase mortgages had a 60.1 percent closing rate, unchanged fromrnAugust but 4.8 percentage points higher than in November, the earliest date forrnwhich this data is available.  Refinancingrnclosings jumped significantly, from 47.1 percent last November and 47.8 percentrnin August to 50.5 percent in September. </p

Loans that closed in September had anrnaverage FICO score of 750 and a debt-to-income (DTI) ratio of 23/34, both unchangedrnfrom August.  The average loan to valuernratio declined to 78 from 79 in august and was down 4 percentage points fromrnits peak in May.  Loan applications thatrnwere denied had a FICO of 704, a DTI of 27/44, and an LTV of 88.  </p

In 2011, the total volume of mortgages thatrnran through Ellie Mae’s mortgage management software was approximately twornmillion loan applications, or 20% of all U.S. mortgage originations. The Origination Insight Report mines itsrnapplication data from a sampling of approximately 33% of all mortgagernapplications that were initiated on its origination platform.

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