The average loan to value ratio of closed loans broke through 80 percent in May according to the Origination Insight Report released today by Ellie Mae.  The average LTV was 81 percent, up from 80 percent in April and the highest level since Ellie Mae began tracking these details in August of last year. 

Ellie Mae reports detail of both closed loans and denied loan applications that flow through its mortgage management software and network and represent more than 20 percent of U.S. mortgage origination volume.

"In May, the average loan-to-value (LTV) for closed loans broke the 80% mark for the first time since our tracking began in August 2011," said Jonathan Corr, chief operating officer of Ellie Mae. "The increase appeared to be driven by an easing of LTVs on conventional refinances (the average LTV was 72% in May compared to 69% in April). Last month, closed conventional refinances with LTVs of 95%-plus jumped to 11%, up from 7.1% in April and 3.6% in March, which may be a sign that HARP 2.0 is helping more borrowers.

At the same time the LTV of closed loans is rising so has the LTV of denied loans, increasing steadily from 82 percent in August to 88 percent in May while debt to income ratios (DTI) and FICO scores have remained relatively unchanged.  While more underwater borrowers have been attracted by the publicity attending the changes in HARP apparently many have not successfully refinanced.  

To get a meaningful view of lender "pull-through," Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the February applications) to calculate a closing rate for May. Ellie Mae found that 47.2% of all applications closed in May compared to 48.1% in April.

Refinancing represented 54 percent of closed loans in May, down 2 percentage points from April.  FHA loans had a 25 percent share, down 3 points while conventional loans increased 3 points to a 65 percent share.  It took the average loan 46 days to close, up one day from April.  Refinancing loans required an average of 48 days and purchases 44.

In addition to the 81 percent LTV, the average closed loan in May had a FICO score of 744, one point higher than April, and a DTI of 24/35, a number that has remained virtually unchanged since tracking began last August.  A loan that was denied had, in addition to the 88 percent LTV, a FICO of 702, unchanged from April, and a DTI of 28/43, little changed over the last ten months.

As might be expected, there were substantial differences in the profiles of loans accepted and denied by FHA and conventional lenders.  What was surprising was the additional leeway FHA lenders appear to grant to purchasers over refinancers.

May Loan Outcomes