Loan Closing Rates Hit Record High

There was a dramatic drop in the average note rate for loans originated in July and the refi share of those originations rose significantly.  The July Origination Insight Report from Ellie Mae shows a seventh consecutive monthly drop in the 30-year note rate on closed loans from 4.40 percent in June to 4.18 percent in July.  Refinancing responded, the share of those loans jumped to 38 percent of all loans from 31 percent the previous month, driving the purchase share to 62 percent from 69 percent.

The higher refinance share applied to all product types. The FHA share rose 6 percentage points to 24 percent, refinances accounted for a 42 percent share of conventional loans, up from 32 percent, and refinancing made up 31 percent of VA loans, a 7-point increase.

Closing rates continued to rise to a new high with the closing rate on all loans at 77.0 percent, up from 76.8 percent in June. Closing rates on purchases increased to 79.3 percent from 78,8 percent in June, while closing rates on refinances dropped slightly to 72.9 percent in July, down from 73.4 percent the previous month. Ellie Mae basis its estimates of closing rates on a sampling of loan applications initiated 90 days earlier, in this case in April.

Conventional loans made up 68 percent of total originations, a 1-point gain, while the FHA share lost 1 point to 17 percent. The VA portion of the total has remained at 10 percent for four consecutive months. The percentage of Adjustable Rate Mortgages (ARMs) decreased to 5.7 percent, down from 6.3 percent in June.

The time to close all loans held steady at 42 days in July; the refinancing timeline increased by two days while the time to close a purchase declined by two days, to 40 and 43 days respectively. Average FICO scores held at 731 for the second consecutive month.

"Shrewd homeowners are locking in lower interest rates which has driven the spike in refinance activity in July," said Jonathan Corr, President and CEO of Ellie Mae. "And with the Federal Reserve cutting rates further, we expect to see continued activity as homebuyers are able stretch their dollar and enter the market."

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

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