Decoding Compliance

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the latest ORIGINATION Or ig i nat ion s e r v ic i ng a na ly t ic s Refinancing is righting itself in the marketplace with rising shares and shorter closing times. R efinance loan share jumped to its highest level in at least a yearand-a-half, according to Ellie Mae's Origination Insight Report for January. Ellie Mae's monthly report is based on data from a sampling of the loan applications that flow through the company's Encompass360 mortgage management software and its network. To get a meaningful view of lender "pull-through," the agency reviews applications initiated 90 days prior—October 2012, in this case. According to the report, refinances made up 73 percent of loans closed in January—the highest level recorded since Ellie Mae began tracking the data in August 2011. January's refinance figure is 4 percentage points higher than December's. Jonathan Corr, president and COO of Ellie Mae, credited the spike to continued low interest rates and homebuying seasonality as well as elevated activity under the Home Affordable Refinance Program (HARP). "Closed conventional refinances with LTVs [loan-to-value ratios] of 95 percent-plus ticked up slightly to 11.6 percent in January 2013 from the previous high of 11.4 percent in December 2012, indicating that more underwater borrowers are being able to refinance thanks to HARP 2.0," Corr said. Despite the rise in refinance share, the time it took to close a refinance loan declined slightly in January, falling to 55 days from 57 days previously. However, time to close was up from 48 days in January 2012 (when refinance share was an estimated 66 percent). Meanwhile, the time it took to close a purchase loan stayed flat at 51 days, bringing the close time on all loans to 54 days (down one day from December). The share of loans insured by the Federal Housing Administration (FHA) fell to 18 percent in January, while conventional loan share increased to 74 percent. According to Corr, FHA share was the lowest it's been since Ellie Mae's tracking began, perhaps indicating the agency's revised program—which includes The M Report se c on da r y m a r k e t Closing the Gap higher premiums—has made FHA loans less attractive. The closing rate for all loans in January was 55 percent, slightly above December's 54.7 percent and considerably higher than January 2012's 46.2 percent. The closing rate on purchase loans fell half a percentage point to 60.8 percent, while the rate on refinances increased a full percentage point to 52.6 percent. The average FICO score for a conventional refinance closed in January was flat from December at 763, while the average score for a conventional purchase mortgage was 760 (down from 761). Year-over-year, the declines were more substantial. "Average credit scores for conventional loans in January 2013 were slightly lower compared to the same time last year. A year ago, the average credit score was 769 for a conventional refinance and 763 for a similar purchase," Corr said. "While the overall credit score requirement remains tight, it appears that we are beginning to see some loosening." | 41

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