Buyers Still Wait for Better FICOS

Despite lenders’ claims that standards are loosening, for home buyers seeking conventional purchase loans the FICO needle has barely budged in the past six months.  The median FICO for conventional purchase loans has fallen only four points since 2013 and remains 23 points higher than the last published national median FICO score.

According to Ellie Mae’s Origination Insight Report for May, FICOS for all loan types has fallen from 738 in 2013 to 727 in May.   In May 2014, 32 percent of closed loans had an average FICO score of under 700 compared to 27 percent of loans in May 2013.

However, the median FICO for closed purchase loans in May was 755, down from an average of 759 in 2013 and 20 points higher than homeowners taking out conventional loans to refinance.  The national median FICO score for all consumers was 723 in 2010.

The bulk of the improvement occurred among refi borrowers, not home buyers.  Median FICOS for refi conventional loans fell from 747 in 2013 to 735 in May. Average FICOs for FHA refinancing loans fell from 698 to 673.

The brightest spot for buyers in the May report were median FICOS for FHA purchase loans.  From last year’s average FICOS fell from 695 to 684 in May.  Unfortunately, more and more borrowers have chosen conventional over FHA in recent years due to the rising costs of FHA loans.  In May FHA accounted for only 22 percent of all closed loans.

The May report also tracked significant growth in adjustable rate mortgages, a sign that rising prices are forcing more buyers to choose lower entrance costs.  ARMs’ market share rose to 7.6 percent of all loans in May from an average of 4.2 percent of all mortgages in 2013.

Closing rates fell significantly despite the predominance of purchase loans in the May report.  Average closing tine for all loans was 40 days, down from 46 in 2013.  Purchase loans closed in 41 days.

Ellie Mae’s report draws its data and insights from a robust sampling of the significant volume of loan applications that flow through Ellie Mae’s Encompass® mortgage management software and the Ellie Mae Network™.   In 2013, approximately 3.5 million loan applications ran through Ellie Mae’s Encompass mortgage management solution. The Origination Insight Report mines its application data from a robust sampling of approximately 57 percent of all mortgage applications that were initiated on the Encompass origination platform.

Beginning in May, the Origination Insight Report also includes analysis of VA loans, mortgages made by private lenders, which are backed by the Department of Veterans Affairs, and expanded FHA and conventional loan data.