Loan Closing Share, Credit Profiles Tick Up in May

An examination of loan data from May shows a slight increase in mortgage closing rates even as credit standards edged up.

Drawing from a sampling of mortgage applications from its network, Ellie Mae calculated an overall loan closing rate of 57.8 percent, a bounce up from 55 percent in April. The figure represents applications initiated 90 days prior "[t]o get a meaningful view of lender pull-through," the company said.

Of those closed loans, two-thirds were for home purchases, the highest share on record.

"Since January, purchase share has increased by at least three percentage points per month, and purchases now represent 66 percent of all closed loans," said Jonathan Corr, president and COO of Ellie Mae.

Just over the past year, the share of purchase loans has grown nearly 25 percentage points.

At the same time, ongoing declines in overall application volumes means total purchase numbers are lagging compared to where they were a year ago.

According to the most recent analysis from Capital Economics, applications for home purchases in the month of May were down 17 percent annually as a result of perceived lending tightness, rising mortgage rates, and prohibitive home prices in some areas. As refinances keep slipping against purchase share, market participants are hoping to see purchase activity pick up the slack.

Among loan types, the share of conventional mortgages remained the same at 64 percent, while mortgages backed by the Federal Housing Administration (FHA) also were unchanged at 22 percent of all loans.

For the first time, Ellie Mae also included data for loans insured by the Department of Veterans Affairs, which made up 9 percent of May's closed loans.

Looking at closed loans, Ellie Mae calculated an average FICO score of 727, just up from 726 a month before. FICO scores on closed mortgages have risen steadily since March.

Meanwhile, the average loan-to-value ratio for a closed loan was 82 percent for the sixth straight month.

For denied applications, the average FICO score was down slightly to 689, while the average loan-to-value ratio was flat at 82 percent.