Ellie Mae Inc. has released its Origination Insight Report for August 2012 which found that the time needed to close a mortgage has risen by nearly 25 percent over last year, an average of 40 days to an average of 49 days. The report also found that refinances were a primary factor for driving this change in time. The Origination Insight Report draws its data and insights from a sampling of the significant volume of loan applications—more than 20 percent of all originations in the U.S.—that flow through Ellie Mae’s Encompass360 mortgage management software and Ellie Mae Network. To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the May applications) to calculate a closing rate for August 2012, which was 47.8 percent, compared to 45.8 percent in July 2012.
“The 30-year note rates on closed loans continued to decline, dropping from 3.870 percent in July to 3.763 percent in August 2012. August’s rate was down nearly 100 basis points from the same time last year and the lowest point since we began tracking,” said Jonathan Corr, chief operating officer of Ellie Mae. “The percentage of ARMs also continued its decline to 2.7 percent in August 2012, the lowest point since we began tracking in August 2011, when the percentage of ARMs was 8.3 percent."
“The closing rate for purchase loans increased for the fourth month in a row, from 58.7 percent in July to 60.1 percent in August,” said Corr. “The closing rate for refinances also increased, from 37.9 percent in July to 40.9 percent in August, and the time to close these refinances grew from 48 to 51 days."
In 2011, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately two million loan applications, or 20% of all U.S. mortgage originations. The Origination Insight Report mines its application data from a robust sampling of approximately 33 percent of all mortgage applications that were initiated on the Encompass origination platform. Given the size of this sample and Ellie Mae’s market share, the company believes the Origination Insight Report is a strong proxy of the underwriting standards that are being employed by lenders across the country.
“The percentage of refinances at 95%-plus LTV dropped for the third consecutive month, from 10.2 percent in June and 8.7 percent in July to 7.74 percent in August, a possible sign that HARP 2.0 continues to be cooling off, which is in line with what the Federal Housing Finance Agency has been reporting,” Corr said.
The Origination Insight Report focuses on loans that closed or were denied in a specific month and compares their characteristics to similar loans that closed or were denied three and six months earlier. The closing rate is calculated on a 90-day cycle rather than on a monthly basis because most loan applications typically take one and a half to two months from application to closing. Loans that do not close could still be active applications, or applications withdrawn by consumers or denied for incompleteness or nonqualification.