Ellie Mae: Credit Has Loosened Considerably Since This Time Last Year

Although credit requirements remained unchanged from January to February, there has been significant loosening of credit compared to February 2013, according to Ellie Mae's Origination Insight Report.

The report shows that the average FICO score on all loans closed in February was 724 – compared to 745 in February 2013. This represents a 21-point decrease.

Last month, 33% of closed loans had an average FICO score under 700 compared to 24% in February 2013, according to the report.

The report shows that purchases accounted for 57% of all mortgage volume for February – up from 53% in January. The refinance share of volume declined to 43% – down from 47% in January. This has been the trend for the past six months or more, as refinancing volume continues to decline on higher mortgage interest rates.

With the massive drop in volume, it would make sense that loan processing and closings would be expedited at a faster rate, which was the case for February. The time to close for all loan types fell from 45 days in January to 41 days in February.

About 22% of the loans processed using Ellie Mae's loan origination platform were Federal Housing Administration loans, up slightly from 21% in January. Meanwhile, conventional loans represented 65% of all loans, down from 67% in January.

To get a meaningful view of lender ‘pull-through,’ Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the November 2013 applications) to calculate an overall closing rate of 55.3% in February, up from 54.9% in January.

‘The share of purchase loans jumped four percentage points, representing 57 percent of all closed loans in February,’ says Jonathan Corr, president and chief operating officer of Ellie Mae. ‘This is the first time in four months that the share of purchase loans increased month over month and the largest one-month increase since August 2013, when the share of purchase loans also jumped four percentage points.’

Corr also noted that the average 30-year note rate fell for the first time in three months to 4.655 in February.

‘And correspondingly, the percentage of adjustable-rate mortgage (ARM) loans decreased for the first time in five months, representing 6.9 percent of closed loans,’ he adds. ‘However, this was still higher than the 2013 average ARM share of 4.2 percent.’

To view the full report, click here.


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