Rising Rates Tilt Origination Composition

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The interest rates on loans that closed in April were the
highest since Ellie Mae started tracking data in 2011.  According to the company’s Origination
Insight Report for April, the 30-year fixed rate for loans averaged 4.79
percent, up from 4.69 percent in March. 

Not unrelated to that rapid rise is the increased domination
of purchase loans.  Their percentage
share increased 4 percentage points to 66 percent in April as refinancing
shrunk to a 34 percent share.  The
percentage of Adjustable Rate Mortgages also increased, claiming the highest
share of total loans, 6.6 percent, since June 2014.

The
declining numbers of refinances
affected all lenders.  FHA refinances fell from 23 percent in March
to 22 percent in April. Conventional refinances dropped from 43 percent to 38
percent, and VA refinances lost 1 percentage point to 27 percent.

 “This month we saw
interest rates increase to the highest percentage point since Ellie Mae began
reporting data in 2011, and with that, the percentage of purchases increased
four percentage points to 66 percent of total closed loans,” said Jonathan
Corr, president and CEO of Ellie Mae. “We’re entering the peak summer
homebuying months and despite tight inventories, we expect to see a robust
purchase market.

The
distribution of loans remained virtually unchanged from other recent
Origination Reports.  FHA loans
represented 20 percent of those closed and Conventional loans 66 percent.  VA loans lost 1 percent, accounting for a 9
percent share.

The
closing rate for all loans and for refinances inched down 0.1 point to 69.5
percent and 64.8 percent respectively. The purchase loan closing rate however took
a bigger hit
, declining from 76.3 to 73.9 percent.  To calculate the closing rate Ellie Mae
reviews a sampling of loan applications initiated 90 days earlier, in this case
the January 2018 applications.

The time to
close all loans held steady across the board with time to close all loans at 41
days. Time to close a conventional purchase dropped one day to 41 days in April.

Overall FICO
scores increased slightly for the third consecutive month to 723. LTV remained
at 79 and DTI remained at 26/39.

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



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