Credit Scores on Closed Loans Continue to Drop According to Latest Origination Insight Report
Underwriting at loosest level in 2015 with debt-to-income ratios at 25/39
November 18, 2015 – Pleasanton, Calif. – Credit scores on closed loans continued to fall to their lowest levels since Ellie Mae began reporting data in August 2011, according to the latest Origination Insight Report released by Ellie Mae® (NYSE:ELLI), a leading provider of innovative on-demand software solutions and services for the residential mortgage industry. The average FICO score on all closed loans fell to 722, marking the fifth consecutive month of decline. Additionally, the average FHA refinance FICO score fell 7 points to 654 while the average VA purchase loan FICO score declined to 705, its lowest point since April.
Ellie Mae’s data also shows that the front-end and back-end debt-to-income (DTI) ratios have loosened materially to 25/39, the highest percentages since January 2014. Additionally, closing rates remained robust with over 66 percent of all loan applications closing for the fourth consecutive month. The closing rate on purchase loans remained steady at 71 percent.
“It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect just last month,” said Jonathan Corr, president and CEO of Ellie Mae. “The time to close loans remained a constant 46 days for yet another month, while the closing rate on purchased loans has stayed above 70 percent. We may begin to see time to close increase in the November data as the new closing disclosures are utilized for the first time.”
The Origination Insight Report mines its application data from a robust sampling of approximately 66 percent of all mortgage applications that were initiated on the Encompass® all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.
Other findings from the October report:
- The average 30-year rate for all loans declined for the second consecutive month, falling to 4.246.
- The time to close on all loans remained steady at 46 days.
MONTHLY ORIGINATION OVERVIEW FOR OCTOBER 2015
|Oct. 2015*||Sept. 2015*||6 Months Ago
|1 Year Ago
|Days to Close|
|Percentage of ARM and Fixed Loan Volume|
|15 Year %||10.3%||10.3%||10.3%||9.6%|
*All references to months should be read as month ended.
PROFILES OF CLOSED AND DENIED LOANS FOR OCTOBER 2015
|Closed First-Lien Loans
|FICO Score (FICO)||722||650|
More information and analysis of closed and denied loans by loan purpose and investor are available in the full report at http://www.elliemae.com/about-us/news-reports/ellie-mae-reports/.
To get a meaningful view of lender pull-through, Ellie Mae reviewed a sampling of loan applications initiated 90 days prior—or the July 2015 applications—to calculate an overall closing rate of 66.8 percent in October 2015 (see full report).
About the Ellie Mae Origination Insight Report
The Origination Insight Report mines its application data from a robust sampling of approximately 66 percent of all mortgage applications that are initiated through Ellie Mae’s Encompass all-in-one mortgage management solution. In 2014, approximately 3.7 million loan applications ran through Encompass. Given the size of this sample and Ellie Mae’s market share, the Company believes the Origination Insight Report is a strong proxy of the underwriting standards that are being employed by lenders across the country.
The Origination Insight Report focuses on loans that closed or were denied in a specific month and compares their characteristics to similar loans that closed or were denied three and six months earlier. The closing rate is calculated on a 90-day cycle rather than on a monthly basis because most loan applications typically take one-and-a-half to two months from application to closing. Loans that do not close could still be active applications or applications withdrawn by consumers or denied for incompleteness or non-qualification.
The Origination Insight Report details aggregated anonymized data. The report does not disclose client-specific or proprietary information.
News organizations have the right to reuse this data, provided that Ellie Mae, Inc. is credited as the source.
About Ellie Mae:
Ellie Mae (NYSE:ELLI) is a leading provider of innovative on-demand software solutions and services for the residential mortgage industry. Mortgage lenders of all sizes use Ellie Mae’s Encompass® all-in-one mortgage management solution, Mavent Compliance Service, and AllRegs research, reference and education resources to improve compliance, loan quality and efficiency across the entire mortgage lifecycle. Visit EllieMae.com or call 877.355.4362 to learn more.