TheMReport — News and strategies for the evolving mortgage marketplace.
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40 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Homebuyers Take ARMS A report reveals why the current market conditions are making ARMs more popular. T he percentage of adjustable rate mort- gages (ARMs) closed in December 2018 reached 9.2 percent, the highest on record for Ellie Mae's Origination Insight Report, which has been cataloging data since 2011. This is up from 8.9 percent a month earlier and significantly up from the 5.6 per- cent share recorded a year ago. The spike in ARMs is "another key indication of how demand has outpaced supply in the hous- ing market as consumers pursue their dream of homeowner- ship," explained Jonathan Corr, President and CEO of Ellie Mae. The uptick in ARMs occurs alongside rising mortgage rates, which ended the year at 5.17 percent for 30-year loans of all types, up from 5.15 percent in November and 4.28 percent a year ago. Conventional loans ended the year with a rate of 5.19. For FHA loans, the rate was 5.20 percent, and for VA loans, the rate was 5.01 percent. Rates rose across all loan types over the year in 2018. ARMs were most popular among conventional loans, mak- ing up 9.2 percent of this section of the origination market. They accounted for 0.9 percent of FHA loans and 0.5 percent of VA loans in December. While still only a fraction of a percent, these rates represent a small uptick over the year among these types of loans. Purchase loans made up 71 per- cent of the loan origination market in December, up 1 percentage point from a month earlier but up no- tably from 60 percent a year ago, another reflection of rising rates over the year. Conventional loans made up 64 percent of loans closed in December. FHA loans account- ed for 20 percent, and Veterans Administration loans accounted for 11 percent of the market. For loans closed in the month of December, the average time to close was 47 days, just one day longer than the length of time for loans closed in November. It took an average of 47 days to close a purchase loan in December and 44 days to close a refinance loan. Across all loan categories the rate of closed loans—the percent- age of applications received in the past 90 days that closed in December—was 71.4 percent, up from November's rate of 70.1 per- cent and comparable to the 71.2 percent recorded a year ago. The average FICO score for loans closed in December was 726, down just one point from the rate recorded during each of the previous three months and up from 722 a year earlier. The average loan-to-value ratio was 79 for the fifth month in a row. Similarly, the debt-to-income ratio matched that of the previous two months, 26/39 and was nearly the same as one year ago.