Driven by deterioration in overall refinance transactions, loan originators closed a smaller share of their applications last month. But the closing rate on loans to finance home purchases improved. With government-insured refinances leading the way, average credit scores on funded loans were lower.
Based on applications started within the prior 90 days, the closing rate was 47 percent during May, a little lower than the 48 percent closing rate a month earlier.
But when broken down by transaction type, last month’s closing rate for refinances fell to 42 percent from April’s 45 percent, while the closing rate on purchase financing increased to 57 percent from 55 percent.
The findings reflect a sampling of one-third of all loans initiated on Ellie Mae Inc.’s Encompass origination platform. Ellie says that 2 million mortgages were run through its Encompass360 system last year.
It took 46 days to close loans that were funded in May, one day more than in April. Refinance closing times were 48 days, and purchase transactions had a 44-day turnaround.
Average FICO scores fell to 744 from the previous month’s 745. Credit scores have now deteriorated for three consecutive months.
Last month’s decline in FICOÂ scores was most pronounced on Federal Housing Administration refinances, with scores dropping to 713 from 720 in April.
Average loan-to-value ratios were also worse each of the last three months, climbing to 81 percent in May from 80 percent a month earlier.
But at 24/35 percent, there was no change from April in the average debt-to-income ratio.
Refinance share of closed loans slipped to 54 percent last month from 56 percent in April.
One quarter of May production was loans insured by FHA. The prior month, FHA share was 28 percent.
