The refinancing share of originations increased again in September, rising 2 points to 58 percent of all loans. Ellie Mae's Origination Insight Report for September shows the increase came almost inclusively in conventional loans where the refi share jumped 5 points to 66 percent. The refinancing share of VA loans rose 1 point to 20 percent while the FHA share was unchanged at 15 percent. The reciprocal share, 42 percent, of purchase mortgages is a significant drop from 50 percent in January, but Ellie Mae notes it is well above the May low of 35 percent of all closed loans.
The increase in refinancing was undoubtably in response to a further decline in the 30-year note rate. The average for all loans was 3.00 percent, down from 3.09 percent in August. Ellie Mae said this rate was the lowest since it began tracking the data in 2011. The average for conventional loans was 3.02 percent; 3.01 percent for FHA loans and 2.78 percent for VA loans.
The distribution of loans across loan types was essentially unchanged from the prior month. The share of FHA loans dipped 1 point to 10 percent, a point picked up by conventional loans which accounted for 80 percent of originations. The VA share was unchanged at 6 percent.
The time to close all loans increased to 51 days in September, up from 49 days in August. The time to close both purchase and refi loans rose slightly, purchase loans from 45 to 47 days and refinances from 50 to 54 days.
Closing rates dipped to 77.1 percent in September, down from 77.2 percent in August. To get a meaningful view of lender pull-through, Ellie Mae reviewed a sampling of loan applications initiated 90 days prior-or the June 2020 applications.
"We are continuing to see interest rates decrease to new historic lows, hovering right at three percent for the month for all loans," said Joe Tyrrell, president, ICE Mortgage Technology. "As we move into fall and the traditionally hot summer homebuying season normally tapers off, we will watch to see if purchase loan applications trend downward and refinances regain momentum. We know that homeowners are continuing to take advantage of the low rates, almost an entire percentage point lower than the same period in 2019, as a means to lower monthly payments and stretch their dollar."
Tyrrell continued, "In addition, we're seeing FICO scores rise to new 2020 highs, approximately 20 points higher than the same period in 2019, indicating that lenders are being more selective, but also that homebuyers and homeowners should understand the various loan products available to find the one that suits their profile best."
The Origination Insight Report mines data from a sample of approximately 80 percent of all mortgage applications that were initiated on Ellie Mae's mortgage management system. The company says its Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.