Refis Enjoy Nice Bounce Thanks to Lowered Rates

There is still life left in refinancing.  While at nowhere near the levels of a few years ago, Ellie Mae's Origination Insight Report for July reported that the percentage of loans that were for refinancing increased by three points to 35 percent.  That gain followed two months of decline.  The refi share was up 2 to 3 percentage points across all loan types.

The increase in refinancing was due of course to the recent lowering of interest rates.  On average, the 30-year note rate on closed loans dropped to 4.25 percent, down from 4.41 percent in April and the lowest level since January.

The share of all originations remained unchanged for each loan type, with Conventional loans garnering 64 percent, FHA 22 percent, and VA 10 percent.  The share of adjustable rate mortgages dropped to 5.7 percent from 5.9 percent the previous month.

The closing rate for all loans increased slightly from 70.3 percent in June to 70.6 percent.  The purchase loan closing rate improved by more than a full point to 76.2 percent while that of refinancing declined by the same amount to 62.4 percent.  To calculate these rates Ellie Mae reviews a sample of loan applications initiated 90 days earlier, in this case in April.

The closing time for all loans was unchanged at 43 days. The time to close a refinance ticked up by one day to 42 days while the timeline for purchase loans remained 43 days.

FICO scores averaged 724, unchanged from June. Scores for Conventional purchases declined by 1 point to an average of 753 while Conventional refinance scores increased by a point to 730.

"The market has been shifting from refis to purchases but we saw a pick-up in refinancing with lower rates," said Jonathan Corr, president and CEO of Ellie Mae. "Overall, closing rates rose in July and Purchase loan closing rates increased to 76.2 percent."

The Origination Insight Report mines data from a sampling of approximately 80 percent of all mortgage applications that were initiated on Ellie Mae's origination software system. The company says the report is a strong proxy of the underwriting standards employed by lenders across the country.