What is that cloud of dust in the
distance? Is it a bird, a plane? We mix
our popular culture references, but maybe it is a faint signal of approaching looser
lending standards. Ellie Mae's
Origination Insight Report for January reports a fairly significant drop in the
FICO scores of closed loans, down 4 points overall compared to the previous
month, to an average of 722. While one month certainly doesn't make a
trend, this was the latest what has been a nearly monthly drop in scores,
coming down off the 2016 high of 731 in August. It was however mostly refinancing that brought
down the average. Conventional refinance
scores dropped 7 points to 732, FHA eased back by 3 points and VA by 2 points.
Ellie Mae also reports that the share of
home purchase originations dipped slightly in January, from 54 to 53
percent. Allocation of loans was
virtually unchanged across loan types compared to December with conventional
loans making up 66 percent of the total, FHA 21 percent (it was 22 percent in
December), and VA 9 percent.
The average time to close a loan increased
one day to 51 in January, a change Ellie Mae says is likely a carry-over from
holiday seasonality. The time to close a
refinance was 53 days, up from 52, while purchase transactions were unchanged
at 48 days.
Closing rates dipped to 72.2 percent for
all loans, down from a record high of 73.2 percent in December. Refinancing had a closing rate of 67.9
percent compared to 69.6 percent the previous month, and the closing rate for
purchase loans was 76.8 percent, down from 77 percent. Ellie Mae basis closing rates on applications
submitted 90 days earlier, in this case October 2016.
"Rates continued to increase in January and with that we
began to see an uptick in adjustable rate mortgages, a trend that we will watch
throughout the year," said Jonathan Corr, president and CEO of Ellie Mae.
"Additionally, FICO scores began to drop slightly across the board while
closing rates remained high as homebuyers locked in rates to close their