The final month of 2013 saw credit standards decline to the lowest level of last year. Credit scores fell from November, while loan-to-value ratios and debt-to-income ratios increased.
Out of all applications started in the previous 90-day cycle, 54.3 percent closed in December. The closing rate was better than 53.1 percent in the previous report but fell slightly from the 54.7 percent in the year-earlier report.
Last month’s closing rate was 46.3 percent for refinancing, while the rate was 60.7 percent for purchase financing.
The statistics were summarized in the Origination Insight Report December 2013 from Ellie Mae. The findings were mined from a 57 percent sampling of all loan applications initiated on Ellie’s Encompass origination platform, which — along with the Ellie Mae Network — handled around 3.5 million applications in 2013.
During December, it took 43 days to close the average loan. Turnaround slowed from 42 days in the previous report but significantly sped up from 55 days in the final month of 2012.
Refinance turnaround slowed to 40 days from 37 days in November, while the time to close a purchase transaction lengthened to 46 days from 45 days.
For all of 2013, it took an average 46 days to close a mortgage, less than the 48 days in took in 2012.
The average FICO score on last month’s production was 727, lower than 729 in November and 748 in December 2012.
Ellie Mae President and Chief Operating Officer Jonathan Corr noted in the report that “2013 closed with the loosest credit requirements of the year.”
However, on denied applications FICOs averaged 698 in December, increasing from the previous month’s 694.
Lenders were also more liberal with LTV ratios on closed loans, which increased to 82 percent from an average of 81 percent a month earlier and 79 percent a year earlier.
But on FHA refinances, average LTV ratios fell to 85 percent from 86 percent in November.
Average DTI ratios on all business rose to 25/39 percent from 25/38 percent and were just 23/34 percent in December of the prior year.
Refinances accounted for 46.3 percent of all activity last month, inching up from 45.4 percent in November. But refinance share has thinned compared to December 2012, when it stood at 51.6 percent.
Refinances closed through the Home Affordable Refinance Program were more active, with conventional refinances at or above a 95 percent LTV ratio accounting for 12.1 percent of business in the latest report versus 8.3 percent in November. It was the second consecutive rise.
Ellie said that mortgages insured by the Federal Housing Administration represented 20 percent of December’s originations, the same as the prior month. FHA share was 19 percent a year earlier.
Of all home loans closed last month, 6.6 percent were adjustable-rate mortgages. ARM share rose from 5.8 percent in November and 2.1 percent in the final month of 2012.
Borrowers who opted for a 15-year mortgage represented 15.1 percent of December’s total, up from 14.5 percent. Fifteen-year share was 15.9 percent a year earlier.
