Loan Processing Time Up 25% Over 2011, Refi's to Blame

The timernneeded to close a mortgage loan has increased by almost 25 percent over thernlast year, from an average of 40 days to 49 and it was refinances that drove thernchange.  According to the Ellie Mae Origination Insight Report for August releasedrnthis morning, the time needed to close a loan for purchase increased from 43rndays in August 2011 to 47 days in August 2012 while during the same period thernaverage time required to close a refinancing increased by two full weeks to 51rndays.</p

Sixty-onernpercent of loans closed in August were for the purpose of refinancing comparedrnto 58 percent in July.  The 61 percent/39rnpercent refinancing purchase split in August was identical to that of one yearrnearlier.  FHA loans represented 21rnpercent of all loans closed in August and conventional loans had a 70 percentrnshare.  The FHA share was down 8rnpercentage points from a year earlier, reflecting the increase in conventionalrnloans.</p

To get a meaningful view of lenderrn”pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90rndays prior (i.e., the May applications) to calculate a closing rate for Augustrn2012, which was 47.8%, compared to 45.8% in July 2012.  The closing rate for refinancing was 40.9rnpercent and for purchases 60.1 percent.</p

“The 30-yearrnnote rates on closed loans continued to decline, dropping from 3.870% in July torn3.763% in August 2012. August’s rate was down nearly 100 basis points from thernsame time last year and the lowest point since we began tracking,”rnsaid Jonathan Corr, chief operating officer of Ellie Mae. “The percentage ofrnARMs also continued its decline to 2.7% in August 2012, the lowest point since wernbegan tracking in August 2011, when the percentage of ARMs was 8.3%.</p

Loan quality continues to increase.  An average closed loan in August had a FICOrnscore of 750, a loan-to-value (LTV) ratio of 79, and a debt-to-income (DTI)rnratio of 23/34.  One year earlier thosernnumbers were 741, 79, and 25/36.  At thernsame time, denied loans had an average FICO score of 708 in August, an LTV ofrn88, and a DTI of 27/43 where one year earlier those numbers were 696, 82, andrn29/45.   </p

 “Thernpercentage of refinances at 95%-plus LTV dropped for the third consecutivernmonth, from 10.2% in June and 8.7% in July to 7.74% in August, a possible signrnthat HARP 2.0 continues to be cooling off, which is in line with what thernFederal Housing Finance Agency has been reporting,” Corr added.</p

Ellie Mae’s data covers approximately 20rnpercent of U.S. mortgage originations. rnThe Origin Insight Report</icomes from an approximately 33 percent sample of all mortgage applicationsrnoriginated on Ellie Mae's proprietary platform.