Lending standards for purchase mortgages have eased slightly since January but not nearly enough to stop renewed criticism that high standards are impairing demand.
Ellie Mae’s May Origination Insight Report confirms that median FICO scores and loan-to-value ratios for purchase loans have loosened up one to four points since last August. Ratios for refis have risen even more, hitting 80 for the first time in the Ellie Mae tracking data.
However, more progress has been made on refinancings than purchase loans. “The increase appeared to be driven by an easing of LTVs on conventional refinances (the average LTV was 72% in May compared to 69% in April). Last month, closed conventional refinances with LTVs of 95%-plus jumped to 11%, up from 7.1% in April and 3.6% in March, which may be a sign that HARP 2.0 is helping more borrowers,” said Jonathan Corr, chief operating officer of Ellie Mae. The Origination Insight Report mines its application data from a sampling of approximately 33 percent of all mortgage applications that were initiated on the Ellie Mae’s Encompass origination platform.
Progress is too slow for critics. A survey released by Coldwell Banker today found that 45 percent of renters believe they will be forced to wait because they cannot qualify for a mortgage and/or don’t have sufficient funds for a down payment. In its May Existing Home Sales Report, also released today, the chief economist for the National Association of Realtors listed tight credit among the causes contributing to a 1.5 percent decline in sales.
“The recovery is occurring despite excessively tight credit conditions and higher down payment requirements, which are negating the impact of record high affordability conditions,” said Chief Economist Lawrence Yun.
However Yun placed most of the blame on tight demand. “The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. The normal seasonal upturn in inventory did not occur this spring,” he said. “Even with the monthly decline, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier.”