Ellie Mae has picked up indications of what it says it will be watching as a possible trend in the data from its November Origination Insight Report. The company notes that the share of refinancing originations during the month remained steady at 39 percent even with a slight uptick in interest rates. However, the FICO scores of borrowers who were refinancing declined slightly across all loan types.
For all loans, the FICO scores declined from an average of 724 in October to 722, but the lender breakdown shows the change was due almost entirely to refinances. For example, FICO scores were unchanged for FHA purchase loans, but declined from 645 to 640 for refis. Conventional purchase loans saw FICO scores decline by 1 point but refis by 2. VA's purchase loan average rose 1 point but its refi loan FICOs were 2 points lower.
Ellie Mae president and CEO says this modest drop in the overall FICO average, but especially among refinances indicates "that lenders may be loosening credit standards to attract the dwindling refinance market. This is certainly a trend we will continue to watch into the winter months," he said.
The distribution of loan originations across loan types remained unchanged for the third straight month. Conventional loans had a 66 percent share, FHA loans 20 percent, and VA loans 10 percent. It was also the third month for the average closing time to hold at 43 days.
The closing rate for all loans rose from 70.4 percent in October to 70.9 percent with purchase loans closing at a 75.4 percent rate, up from 75.2 percent and the rate for refinancing rising from 63.6 percent to 65.1 percent. While Ellie Mae does not comment on the increased pull-through rates for refinancing, it could provide substantiation of their theory about FICO scores. Ellie Mae calculates the closing rate on a sample of loan applications initiated 90 days earlier, in this case, the August 2017 batch.
The Origination Insight Report mines data from a sample of approximately 80 percent of all mortgage applications that were initiated on Ellie Mae's origination system. The company states its report is a strong proxy of the underwriting standards employed by lenders across the country.