Origination Report Notes Improving Closing Rates and Timing

Refinancing and purchases held their respective market shares for closed loans in May at 58 percent and 42 percent respectively according to Ellie Mae's Origination Insight Report for the month. Loans originated for FHA fell slightly to 19 percent from 22 percent the month before while the market share of conventional mortgages rose from 68 percent to 72 percent.

Elle Mae compiles its monthly data from a sampling of the volume of loan applications, more than 20 percent of all applications nationally, that flow through its mortgage management software and network.

The average days to close a loan continued to fall, averaging to 44 days for all loans, and for refinances and 45 days for purchase loans. This is down from 50 days for all loans six months ago and the lowest point of the year.

Credit quality has loosened slightly since the first of the year with FICO scores for both closed and denied loans easing down six points over the last six months to 743 and 701 respectively. Loan -to-value (LTV) and debt-to-income (DTI) ratios have moved only slightly over the last six months and are currently at 79 and 23/35.

To get a meaningful view of lender "pull-through," Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the February 2013 applications) to calculate an overall closing rate of 53.5% in May 2013, up slightly from 53.2% in April 2013.

"On a month-over-month basis, the market in May mirrored April, and credit quality, as measured by FICO, LTV and DTI, continued its slow loosening that started in January 2013," said Jonathan Corr, president and chief operating officer of Ellie Mae.

Corr said the interest rate dip in May, from a 3.808 percent average in April to 3.737 percent in May may have prompted borrowers and lenders to lock in refinance rates and close. While this probably factored into the study pull-through rate during the month, its didn't have any affect on the improved days to close.

"For the past few months, we've noted a gradual decline in high-LTV refinances that are most likely HARP-related," said Corr. "In May, for the first time this year, HARP-related refinancing activity fell below 10% to 9.4%."