Closing rates for conventional and FHA refinancings improved dramatically in April, while lending standards for purchase loans hardly burned and remained at virtually the same levels as three years ago despite housing industry complaints that overly restrictive underwriting rules are crippling sales to first-time buyers.
The refinancing approval rate for all mortgage types jumped to 64 percent in April, up from an average of 59.9 percent of applications in 2014. FHA refinancings improved to 50 percent of applications in April, up from 41.1 percent in 2014. Conventional refinancings rose from 54.6 percent last year to 66 percent in April, according to Ellie Mae’s April Origination Intelligence Report.
The sudden improvement in refinancings most likely reflects improving levels of equity. Owners’ equity as a share of total household real-estate holdings increased to 9.8 percent last year, according to the Federal Reserve. Nearly 273,000 U.S. homes returned to positive equity in the third quarter of 2014, bringing the total number of mortgaged residential properties with equity to approximately 44.6 million, or 90 percent of all mortgaged properties, reported CoreLogic.
Purchase loans accounted for more closings in April than refinancings for the first time in the history of the Ellie Mae report, a sign of the declining refi business. Closing rates for purchase loans rose slightly to 66.5 in April from 63.3 percent last year.
Lending standards for purchase loans remained stuck in neutral. Average FICOS for FHA purchase loans are virtually the same level as there were in April 2014, 681. LTVs and DTI area also virtually unchanged. For closed conventional loans, average FICOS were 756, only three points lower than they were in 2013.