FICO scores for approved mortgage applications in April decreased slightly for the fifth consecutive month as lenders turned their attention to financing buyers during the spring buying season.
Average FICO scores for closed mortgages fell from 749 in January to 743 in March, the steepest decline in the critical measure of creditworthiness since last year at this time. The average loan-to-value ratio for all loans rose slightly from 80 to 81 and the front end/back end debt-to-income ratio was virtually unchanged at 23/35, according to the April Ellie Mae Origination Insight Report released today.
The average time to close a loan fell to 46 days from 48 in March for all loans. Purchase loans took only 44 days to close, on average, down from 47 days in March.
Though standards relaxed slightly, approval rates fell. To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (January 2013 applications) to calculate an overall closing rate of 53.2 percent in April 2013, down from 55.1% in March 2013. The closing rate for all loans fell slightly from 56.8 percent in March to 55.1 percent in April. The average rate in 2012 was 49.0 percent.
“The spring buying season appeared to be in full bloom in April with the percentage of closed purchase loans reaching 42 percent last month, up from 38 percent in March 2013 and 32 percent in February 2013,” said Jonathan Corr, president and chief operating officer of Ellie Mae. “The last time purchase loans broke the 40 percent mark was back in July 2012.” In April 2012, the purchase share was 43 percent, virtually the same as it is today.
“The trend toward more relaxed credit also continued in April 2013 as the average FICO score decreased slightly for the fifth consecutive month to 742 in April 2013 from 743 in March 2013,” added Corr. “Pull-through closing rates dropped slightly last month to 53.2% from 55.1% in March 2013. This may be a reaction to interest rates, which had been climbing for the past five months and then reversed course and fell to 3.808 in April 2013 from 3.813 in March 2013.
In 2012, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately three 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 44% 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.
MONTHLY ORIGINATION OVERVIEW FOR APRIL 2013
|April 2013*||March 2013*||3 Months Ago
|6 Months Ago
|Days to Close|
|ARMs vs. Fixed, Length, Rate|
|15 Year %||15.3%||15.9%||16.9%||16.9%|
|30 Year – Note Rate||3.808||3.813||3.634||3.671|
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