MReport March 2017

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TH E M R EP O RT | 43 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 DEPARTMENT ORIGINATION Home Loan Purchases Take Increasing Share of Market The share of purchase loans is expected to rise this year as climbing mortgage rates deter refinance loans. E llie Mae's monthly Origi- nation Insight Report (OIR), which aggregates data from its lending platforms and networks to display general national trends in the loan servicing industry, showed a rise in the percentage of home loan purchases in December. Home loan purchases made up 54 percent of all closed loans in December, which is slightly higher than the November figure of 53 percent, according to the report. The December figure is slightly higher than the year's initial rate of 52 percent in January, but considerably lower than the high of 65 percent in June. During the same period, the 30-year rate governing all loans rose from 3.81 to 4.05 percent, which likely caused the decrease in the amount of closed loans used for re - financing purposes, which dropped to 46 percent in December from 47 percent in November. The closing rates for homes in December increased to 73.2 percent, which is a percentage point higher than November's figure, while the refinance closing rate was 69.6 percent at December's close. Ellie Mae expects this to be a continuing trend throughout 2017 as the 30-year rate continues its upward climb. "As rates began to increase we saw purchases tick back up in December, signaling the start of a trend we expect to continue into 2017," said Jonathan Corr, President and CEO of Ellie Mae. "We also saw closing rates rise to the highest percentage in 2016 as homebuyers locked in rates and lenders closed loans before the conclusion of the year." Average FICO Scores were down to 726 in December from 728 in November but still up from the average FICO score of 719 in January. FHA purchase FICO scores stayed level at 686, while the FHA refinance FICO scores saw a decrease of one point, ending up at 655 for December. Conventional purchase FICO scores were 753 in December, staying even with the past three months and consistent with the 2016 average FICO score of 753. Builder Confidence Levels Out Following Spike After reaching an 11-year high, home builder confidence waned slightly on concerns over rising mortgage rates, lack of lots, and labor access. W ith builders in the single-family housing market anticipating regulatory relief from new admin- istration, builder confidence in the market shot up in December to its highest level in more than 11 years before falling slightly in January. For January, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) declined by two points from December to a level of 67, but it is still on "solid" footing, according to NAHB. "The solid reading is consistent with building expectations heading into the new year," NAHB Chief Economist Robert Dietz said. "NAHB expects 10 percent growth in single-family con - struction in 2017, adding to the gains of 2016. However, ongoing industry concerns include rising mortgage interest rates as well as a lack of lots and access to labor." The HMI's three components—builder perceptions of cur - rent single-family home sales, sales expectations for the next six months, and prospective buyer traffic—are scored and then aver- aged; an index score over 50 indicates that more builders view conditions as good rather than poor. Sensing that regulatory relief may be imminent from the increas- ing costs of building regulations, which have jumped by 29 percent since 2011, builders turned in an HMI reading of 70 for December, later revised down to 69, its highest level since July 2005. While the HMI's overall reading of 67 remains solid, all three com - ponents of the Index declined in January. The current sales condi- tions and sales expectations for the next six months components fell by three points and two points, respectively, to 72 and 76. The buyer traffic component, which rose above 50 for the first time in 11 years in December, inched down by one point to 51 in January. One of President Trump's themes during his campaign, and particularly since his election, is reducing regulation. Members of the NAHB heard from Trump in person last summer on the topic of reducing regulatory burdens at the NAHB 2016 Midyear Board of Directors Meeting in Miami. Trump told the builders at that meeting that "nobody other than, I would say, the energy industry, that is overregulated more than the home - building industry."

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