Borrowers Get Ahead of Tax Changes, Refinance Activity Up in December


The new tax law appeared to have slightly influenced mortgage
in December, ahead of its actual implementation. Ellie Mae, in its
December Origination Insight Report,
said the share of refinances ticked up and closing rates on both purchases and
refinances increased from November, across all loan types. Both increases were
possibly due in part to borrowers trying to lock in the existing mortgage interest
deduction limit
($1 million) before the new $750,000 limit kicked in on January

The closing rates on all loans increased from 70.9
percent to 71.2 percent while closing rates on refinances rose from 65.1
percent to 65.6 percent and that for purchases increased to 76.1 percent from
75.5 percent. Closing
rates also increased across FHA, conventional and VA loans for both purchases
and refinances.

The share of loans that were for refinancing rose one
percentage point to 40 percent
, a point taken away from purchase loans that dipped
to 60 percent.  In addition to any effects
from the tax law, the higher refinance share is a seasonal effect of fewer home
purchases during the holiday season. The distribution of loans among lenders
was unchanged for the fourth straight month with conventional loans at 66
percent, FHA loans accounting for 20 percent and the VA with a 10 percent

Closing time for all loans increased
to 44 days, up 1 day from the previous month.

“As we closed out 2017 we saw an
increase in the percentage of refinances due to seasonality as fewer purchases
take place in the fourth quarter, and likely homebuyers were taking advantage
of the mortgage deductibility
limit before it decreased to $750,000 on December
15th,” said Jonathan Corr, president and CEO of Ellie Mae. “We probably can
also attribute some of the increase in closing rates to last-minute efforts by
borrowers to close loans before the tax changes took effect.”

Ellie Mae’s Origination Insight
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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