Ellie Mae's Origination Insight Report shows that the mortgage industry continued to move into a purchase market in July, with purchase loans accounting for 67% of all closed loans, compared to 65% in June and 53% in July 2013.
Refinances accounted for only 32% of loans originated via Ellie Mae's Encompass mortgage management software and the Ellie Mae Network in July, whereas they accounted for 33% of all loans in June and 47% of all loans in July 2013.
To get a meaningful view of lender pull-through, Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the April 2014 applications) to calculate an overall closing rate of 57.7% in July, down from 60.7% in June.
‘The purchase market continued to climb in July with the share of closed purchase loans reaching 67 percent, the highest percentage since we began tracking this data in August 2011,’ says Jonathan Corr, president and chief operating officer of Ellie Mae, in a statement. ‘Meanwhile, time to close for all loans dropped to 37 days, the lowest average we've seen since we began tracking. This reflects time to close decreasing across the board, with an average of 36 days for conventional loans and 38 days for Federal Housing Administration and Veteran's Affairs loans.’
Part of the reason loans are closing faster is simply that there is less volume for lenders to deal with. It should be noted that although purchases accounted for a greater share of overall volume, that does not necessarily mean purchase volume was up month over month.
Helping to drive the increase in purchase volume share is the fact that interest rates fell in July, with the average rate for a 30-year fixed-rate mortgage declining to 4.388%, down from 4.421% in June. With mortgage interest rates holding near historical lows, fewer homeowners seeking to refinance, and demand from home buyers increasing, the industry should continue to move further into a purchase market for the remainder of this year.
The report also indicates that some lenders loosened their lending standards in July: The average FICO score fell one point to 727, reversing four months of gradual increases.
In a further sign of easing, 32% of closed loans had an average FICO score under 700 last month compared to 25% in July 2013, Corr notes.
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