As loan-to-value ratios tightened last month, credit scores have risen each month this year. But a bigger proportion of loans closed as refinance share rose.
Out of all residential loans funded during July, 65 percent were conventional mortgages. Conventional share was greater than 62 percent one year prior.
Another 23 percent of last month’s business were loans insured by the Federal Housing Administration. FHA share slipped from 24 percent in July 2015.
Just 9 percent of July 2016 fundings were mortgages guaranteed by the Department of Veterans Affairs. VA share thinned from 10 percent a year earlier.
The metrics, along with a host of other data, were presented in the July 2016 Origination Insight Report from Ellie Mae Inc. The report reflects a three-quarters sampling of all mortgage applications initiated on the Encompass origination platform.
Of loan applications begun in the previous 90-day cycle, 71.6 percent closed during the latest month. The closing rate improved from 69.6 percent in June and 66.2 percent in July 2015.
On refinances, the closing rate was two-thirds in July 2016, while it was a little better than three-quarters on purchase financing.
Conventional closing rates were 72 percent, while 70 percent of FHA applications closed, and the VA closing rate was 67 percent.
From application to funding, it took 46 days to close a loan last month, the same as the prior month and two days faster than a year prior.
Refinances took 48 days to close in the most-recent month, while purchase turnaround was 46 days.
Conventional loans were funded in 45 days, while
FHA mortgages spent 47 days in process and VA loans had turn times of 49 days.
FICO scores averaged 727 in July 2016, tighter than 726 the previous month. Credit scores have increased each month since January 2016, when they averaged 719.
The rising credit scores are likely due to increased demand as a result of falling interest rates, with lenders moderating their pipelines by tightening lending requirements.
For instance, during the first quarter of this year, Freddie Mac estimates that mortgage originations totaled $385 billion. During that same time, FICO scores averaged roughly 720 based on Ellie’s data.
But during the second quarter, when Freddie estimated
$535 billion in U.S. mortgage production, average credit scores climbed to around 724.
The continued increase in scores during July comes as Freddie forecasts
$595 billion in third-quarter originations.
In July 2015, the average FICO score was 725.
Credit scores averaged 739 last month on conventional refinances, while they were 754 on conventional purchases.
FICO scores averaged 654 on FHA refinances in July 2016 and 686 on FHA purchase financing.
VA refinances had average FICO scores of 706 in the latest report, while VA purchase-money loans had
an average score of 709.
Last month’s average LTV ratio was 80 percent, lower than 81 percent a month earlier and a year earlier.
LTV ratios on conventional refinances were 67 percent, and they were 80 percent on conventional purchase transactions.
FHA refinances had an average LTV ratio of 79 percent, and the average was 96 percent on FHA purchase-money loans.
Refinances of VA mortgages had average LTV ratios of 88 percent, and VA purchase transactions had an average ratio of 98 percent.
Debt-to-income ratios were no different than in June 2016 at 24/38 percent.
They were tighter, though, than 25/38 percent in July 2015.
July 2016’s DTI ratios averaged 24/37 percent on conventional refinances and 23/34 percent on conventional purchases.
At 28/45 percent, FHA refinance DTI ratios were higher than 27/41 percent on FHA purchase financing.
VA DTI ratios averaged 24/40 percent on refinances and purchases.
Refinance share was 37 percent last month, widening from 34 percent in June and 36 percent in July of last year.
On conventional business, the July 2016 refinance share was 47 percent, while it was 16 percent on FHA loans and 23 percent on VA mortgages.
