Purchase Originations Gaining on Refis Despite Lower Rates

The balance between loans originated for purchase and for refinancing shifted further toward the purchase side in May according to the Ellie Mae Origination Insight Report.  The 33 percent/66 percent split were new low and high marks for Ellie Mae which began reporting data in 2011.  Refinance and purchase originations had respective shares of 37 and 63 percent in April and 58 and 42 percent in May 2013.

If we consider other recent reports agree that all-cash purchases have also been increasing, an even more pronounced increase in overall purchase share is implied (because this report is derived from data in Ellie Mae's LOAN origination software).

The gap was even wider for loans originated for FHA; only 19 percent of those loans were for refinancing while 81 percent were purchase mortgages.  Conventional loans split 40 and 59 percent.

Twenty-two percent of all originations were FHA loan and 64 percent were conventional.  Both percentages were unchanged from April and the FHA shares has remained the same for four straight months.  Nine percent of loans were backed by the VA and 5 percent were classified as "other."

The profile of a closed loan remained largely unchanged from April and has varied little all year.  The average FICO score was up one point from the previous month to 727 while the loan-to-value and debt-to-income rations were unchanged at 81 percent and 24/37 respectively.

It took an average of 40 days to close a loan in May and that timing was essentially the same regardless of the loan purpose or for whom it was originated.  The average for all of 2013 was 45 days.

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 2014 applications) to calculate an overall closing rate of 57.8% in May compared to 55.0 in April.  There was a substantial difference in the pull-through rate for refinancing, 52.3 percent, compared to purchase loans at 61.6 percent.  Both rates were higher than in April when pull-through was 49.6 percent and 58.8 percent

Ellie Mae's report comes from a sample of application data that runs through its mortgage management system which handled approximately 3.5 million applications in 2013.