More Loans Close Despite Tight Standards

Latest mortgage data is a puzzlement.  A higher percentage of mortgage applications, including purchase mortgages, closed in June than in the past three years even though lending standards for purchase mortgages are virtually unchanged in a year.

The closing rate for mortgages received by lenders in the past 90 days closed in June.  The jump in approvals drove the closing rate to 60.7 percent, higher than any month since Ellie Mae began tracking data in August 2011.

Purchase loans also hit a record high at 63.6 percent, up from 61.1 percent in May.  Last year purchase loans averaged a closing rate of 60.1 percent.  In June 2012, the closing rate for purchase loans was 57.8 percent.

“That 60.7 percent marks the first time since August 2011, when we began tracking data, that the closing rate for all loans eclipsed 60%. Parsed out, closing rates for refinances and purchases landed at 55.8 percent and 63.6 percent, respectively — both highs for 2014.  With more loans closing, average days to close a loan increased, albeit slightly, to 41 days,” said Ellie Mae CEO Jonathan Corr.

Though closings increased, lending standards have barely budged.  In June, 32 percent of all closed loans had an average FICO score of under 700, the same percentage as June 2013.  Median FICOS for closed purchase conventional loans have fallen only 5 points in a year.

For FHA purchase  loans, used by about half of all first-time buyers today, median FICO scores have dropped 13 points in a year, to 683, but LTV ratios and DTI ratios are virtually the same as they were in June 2013.  For conventional purchase loans, median FICO scores have fallen only slightly over the past 12 months, from 760 to 755.  LTV and DTI ratios are virtually the same.