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the latest ORIGINATION Or ig i nat ion Ellie Mae Reports on May Originations Closing rates picked up a bit, but little else changed. Mortgage applications fall under the weight of declining refinance volume. were up to an average 4.58 percent for a 30-year fixed-rate mortgage (by MBA's measure)— the highest level since July 2011. Though rates have come down since the spike at the end of June, Capital Economics expects they will remain close to 4.5 percent through the end of 2013. While refinance applications fell, however, purchase applications—"the better indicator of underlying demand in the housing market"—edged up 0.1 percent month-over-month in June. Though purchase volume fell 3.1 percent in the latest weekly report, it still stands 12.3 percent higher than last year. "It's possible that the rise in rates is encouraging those thinking about buying to commit to a purchase now to avoid further rate hikes, hence the resilience of applications for home purchase," Capital Economics said. "But the bigger point is that, with rates still at historically very low levels and affordability favorable, there's no reason that housing demand cannot continue strengthening." "For the past few months, we've noted a gradual decline in high-LTV refinances that are most likely HARP-related." —Jonathan Corr, Ellie Mae The M Report | 61 se c on da r y m a r k e t M ortgage application volume saw a significant tumble throughout June as rising interest rates collapsed refinance demand. According to data taken from the Mortgage Bankers Association (MBA) and compiled by Capital Economics, total application volume plummeted 22.5 percent in June, more than 10 times the 2 percent decline recorded in May. According to the MBA's numbers, applications fell 11.7 percent in the last full week of June alone. The major factor behind the drop was the precipitous decline in refinance application volume, which was down 29.5 percent from May—including a 15.6 percent fall in the last week. Capital Economics also noted refinance applications were down year-over-year in June for only the second time in the past 18 months. As expected, June's drop in refi demand tracked an increase in mortgage interest rates, which a na ly t ic s Rising Rates Topple Application Volume slightly (up one day to 45). Meanwhile, the refinance-topurchase mix stayed flat to April at 58 percent refinance to 42 percent purchase loans. Credit requirements on all closed loans were up just slightly, with the average closed loan having a FICO score of 743 (over April's 742). The average loan-tovalue ratio (LTV) on closed loans was 79 percent, down from 81 percent in April. For denied loans, the average FICO score was unchanged at 701, while the average LTV was down slightly to 84 percent. Ellie Mae also observed a continued drop in potential activity under the Home Affordable Refinance Program (HARP). "For the past few months, we've noted a gradual decline in high-LTV refinances that are most likely HARP-related," said Ellie Mae president and COO Jonathan Corr. "In May, for the first time this year, HARPrelated refinancing activity fell below 10 percent to 9.4 percent." s e r v ic i ng T he mortgage market looked largely the same in May as it did in April, according to Ellie Mae's Origination Insight Report. The report draws data from a sampling of the loan applications that flow through the company's Encompass360 software and the Ellie Mae Network. To get a meaningful view of lender "pull-through," Ellie Mae reviews samplings of loan applications initiated 90 days prior (the February applications). Using that data, Ellie Mae calculated an overall closing rate of 53.5 percent in May, up slightly from 53.2 percent the prior month. The closing rate for refinances dropped a bit, falling to 49.1 percent, while the closing rate for purchase loans rose more than 2 percentage points to 60.7 percent. The average number of days to close was down, dropping to a 2013 low of 44. Refinances closed more quickly than in April (44 days compared to 47), while purchase closing timelines increased