TheMReport — News and strategies for the evolving mortgage marketplace.
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36 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION the latest Can loan servicing be personal? Using modern, cloud- based technology and dedicated support teams, we shape our operations to how our clients do business. Learn more at bsifinancial.com/personal The new standard for performance. 972.347.4350 sales@bsifinancial.com HarP activity down again in second Quarter Despite efforts to keep it alive, borrowers continue to skip the program. t he total number of mortgage refinances in the United States experienced a slight increase in June, though overall activity for the second quarter was down, according to the Federal Housing Finance Agency's (FHFA) Q2 report on refinancing activity. Even with the monthly increase in refi- nances, FHFA reports that many borrowers are still eligible to refinance through the government's Home Affordable Refinance Program (HARP) but have not taken advan- tage of the offering. HARP-refinanced homes made up only 15.7 percent of total refinanc- es in Q2, according to FHFA. Fannie Mae and Freddie Mac have facili- tated the completion of more than 19.5 million mortgage refinances since 2009. More than 3.1 million of those have been through HARP. Of the more than 344,000 homes refi- nanced in Q2 2014, just over 54,000 were through HARP—a significant drop from the 77,000 HARP refinances reported in Q1. FHFA estimated there were more than 810,000 HARP-eligible borrowers in Q1 2014 that had not refinanced despite having a financial incentive to do so. Refinancing through HARP could mean an annual savings of almost $2,300 on average, according to the agency. In an effort to reach out to those home- owners eligible for HARP refinancing, FHFA held town-hall style meetings in Chicago and Atlanta, areas with high concentrations of HARP-eligible borrowers. The agency said in its report that similar events are planned for Detroit and Miami. HARP was scheduled to expire on December 31, 2013, but was extended until December 31, 2015, in order to assist more underwater borrowers. HARP's year-to-date numbers remain high in certain states despite the low national aver- age, according to FHFA. About 37 percent of refinances in Georgia were completed through HARP during the first half of this year, as were 35 percent of Florida's refinances. Both numbers are nearly double the national average. FHFA also reported that 15- and 20-year mortgages comprised more than 25 percent of HARP refinances for borrowers who were underwater on their mortgage loans. Mortgage closing rate drops from record High purchase lending claims larger share of the market but volumes remain weak. d espite a slight easing in credit standards, the percentage of loan applications closed in July slipped to a three-month low, Ellie Mae reported in its monthly Origination Insight Report released in late August. Tracking loan applications initiated 90 days prior, the company calculated an overall clos- ing rate of 57.7 percent in July, down from 60.7 percent in June and 57.8 percent in May. The decline came as home purchase applica- tions expanded to take up a larger piece of the market. According to Ellie Mae, the share of closed purchase loans rose to 67 percent in July, the highest reading since the company began tracking in August 2011. Despite an increase in market share, actual purchase application volumes still look weak. Numbers released by the Mortgage Bankers Association (MBA) show purchase applica- tions dropped 3.6 percent month-over-month in July and were down 11 percent compared to last year. The declining purchase volume came despite a dip in mortgage rates, according to Ellie Mae's data. The company recorded an average 30-year rate of 4.39 percent for all loans, down from 4.42 percent in June. With applications on the decline, the time it took to close a loan in July averaged 37 days, the lowest on record in Ellie Mae's survey. "This reflects time to close decreasing across the board, with an average of 36 days for conventional loans and 38 days for [Federal Housing Administration] and [Veterans Affairs] loans," explained Jonathan Corr, presi- dent and COO of Ellie Mae. Meanwhile, credit standards on closed loans shifted down just slightly, with the average FICO score slipping to 727 after a four-month upward trend. The average loan-to-value (LTV) ratio was unchanged for the seventh straight month at 82 percent. For denied loans, the average FICO score was up three points to 689, while the average LTV dropped to 81 percent. "A further sign of easing: 32 percent of closed loans had an average FICO score under 700 [in July 2014] compared to 25 percent in July 2013," Corr said.