Lending standards eased last month, with average credit scores down three points in January. Over the past year, the closing rate on refinances has retreated while closing rates have risen on purchase financing.
During January, mortgage lenders closed 54.9 percent of loan applications that were taken in the previous 90-day cycle.
The closing rate improved slightly from the prior month’s report, when the rate was 54.3 percent, but was marginally worse than 55.0 percent in the year-earlier report.
The statistics were provided by Ellie Mae and discussed in its January 2014 Origination Insight Report.
The results reflect a 57 percent sampling of applications initiated on Ellie’s Encompass origination platform. In 2013, around 3.5 applications ran through Encompass and the Ellie Mae Network. That’s a big chunk of the estimate of 6.3 million to 7.1 million in closed loans for last year by iEmergent.
While the closing rate on refinances has tumbled to 46.7 percent from 52.6 percent in January 2013, the closing rate on purchases has improved to 61.6 percent from 60.8 percent. The year-over-year disparity could reflect a higher proportion of loan applicants who abandoned the refinance process when rates crossed a certain threshold.
The average U.S. home loan took 45 days to close last month. Turnaround slowed from 43 days in December but improved from 54 days in the same month last year.
Refinance time frames slowed to 44 days from 40 days in December, while purchase turnaround was 47 days last month versus 46 days.
Average FICOÂ scores on closed loans fell to 724 from 727 in the final month of last year. FICOÂ scores have softened significantly since January 2013, when they averaged 749.
Ellie reported average loan-to-value ratios at 82 percent, the same as in December. Average LTVs have crept up, however, from 79 percent in the same month last year.
On denied loans, average LTV ratios moved up to 83 percent from 82 percent but fell from 85 percent a year earlier. On refinances insured by the Federal Housing Administration, average LTVs have tumbled to 85 percent from 89 percent in January 2013.
At 25/39 percent, there was no change from the prior month for average debt-to-income ratios. Lenders have loosened their DTIÂ standards from a year earlier, when the average ratio was 23/34 percent.
Exactly 15 percent of borrowers on closed loans last month chose a 15-year mortgage. The share was lower than 15.1 percent a month earlier and 16.9 percent a year earlier.
January’s refinance share was 47 percent, inching up from 46 percent the prior month but much thinner than 73 percent in January 2013.
“For a third consecutive month, HARP-related refinancing activity increased,” Ellie Mae President and Chief Operating Officer Jonathan Corr said in the report. “Conventional refinances at 95 percent-plus LTV rose to 14.3 percent in January 2014, the highest they’ve been since we began tracking this data in October 2011.”
The share of business that was FHA-insured meandered up to 21 percent from 20 percent in December and increased from 18 percent a year earlier.
Adjustable-rate mortgage share rose for the fourth consecutive month to 7.2 percent — the highest ARM share since it was 8.3 percent in August 2011.
