Refinances Rise While Loan Approvals Fall

After declining for most of the year thus far, the share of refinance loans experienced a 3 percentage point boost in September, according to the latest Origination Insight Report from Ellie Mae. Refinances made up 36 percent of all loans closed over the month, the report states.

At the same time, a lower percentage of loans made their way to closing in September compared with the month before, and the time it took to close those loans that did make their way through the approval process increased, according to Ellie Mae.

"It appears there may be life left in the refi market, as a number of consumers are still taking advantage of recovering equity in their homes and low interest rates to knock down their mortgage payments," said Ellie Mae's president and COO, Jonathan Corr.

The closing rate for all loans was 58.1 percent in September, down from 61.1 percent the previous month.

Among refinance loans, the decline was more drastic. The closing rate for refinances was 48.3 percent, a near 6 percentage point decline from the previous month and the lowest closing rate since February, Ellie Mae reports.

Also for the first time since February, the time it took to close a refinance loan reached 40 days, according to Ellie Mae. This is, however, only a one-day increase from the previous month.

Purchase loans took just a little longer to close in September at 41 days.

Among all loans closed in September, conventional loans took the shortest time to close: 39 days. VA loans took 41 days to close, and FHA loans took 42 days to close.

The average FICO score for a loan closed in September was 726, just one point lower than the month before but significantly lower than a year ago, when the average was 732.

However, Ellie Mae pointed out the percentage of approved loans with FICO scores under 700 was lower this September than last September—32 percent compared to 34 percent a year ago.

The average approved loan-to-value ratio held steady at 82, as it has all year, and the debt-to-income ratio has also remained unchanged for several months at 24/37.

Credit scores were highest among conventional loans at 732 in September. FHA loans closed in September had an average FICO score of 676, and VA loans closed over the month had an average score of 702.