Ellie Mae: Origination Insight Report for May

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

Closed Loans

Denied Applications

Loan
Type

FICO

LTV

DTI

FICO

LTV

DTI

Conv.
Purchase

764

79

21/33

728

82

25/41

Conv.
Refi

766

69

23/33

721

87

27/42

FHA
Purchase

701

95

27/41

670

95

32/47

FHA
Refi

713

86

26/39

669

88

30/48

 

…(read more)

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Lots of Training Sessions, NMLS Stats and Fraud Numbers; Oakland to Require Foreclosure Fees

Some
people are looking to fill their time – apparently they have too much on their
hands
.

On the
other hand, some companies are looking to fill jobs. PHH Mortgage is looking to fill positions in its Mt. Laurel, NJ,
Jacksonville, FL, and Sacramento, CA offices, from entry-level customer service representatives to licensed and
experienced originators, processors, conventional and FHA underwriters, and
experienced managers. PHH, one of the top five retail originators in the
nation, is seeking people with a diverse range of experience, including recent
college graduates, people looking to make a career change, and proven mortgage
professionals seeking to build a career with a new company. Interested job
seekers can view more details and submit a job application at www.phhjobs .com. Qualified applicants will
receive consideration for employment without regard to race, color, religion,
sex, national origin or any other characteristic protected by law. 

Guild Mortgage has a full-time
opportunity for a Lock Desk Specialist in its Secondary Marketing
Department. This position requires a strong understanding of mortgage loan
programs and loans from application to closing. Responsibilities include
creating and maintaining rate sheets, coordinating the distribution of investor
guidelines and changes, quoting rates, locking loans, working with investors,
and researching new investors and analyze products. An ideal candidate will
have 2 to 3 years recent mortgage banking experience, specifically in Secondary
Marketing, excellent written and verbal communication skills, and a focus on accuracy
and attention to detail while being proficient at computer work. Guild, which
has been around for over 50 years and is originating $4-5 billion per year, is
located in San Diego. Resumes should be sent to Shaun Peck at speck@guildmortgage .net.

Underwriters
like to think that underwriting is the key to prudent loan origination. I will
not disagree, but huh? Are residential
underwriting criteria becoming less restrictive?
Documentation is certainly
on the upswing (I’ve heard underwriters say that they’re more like auditors
than underwriters) and, per Ellie Mae, it took longer to close a loan in April
(45 days), but the average FICO score on a successfully closed loan fell
somewhat, “suggesting less restrictive underwriting.” In general, average
scores through Ellie’s platform have been sitting 740-750 for many months. The
same report shows the LTV on closed loans reaching a nine-month high of 80 in
April, compared to 77 in March and 76 in February and January. One can see it
all here
.

Bank closings
have slowed in 2012, and we only had one Friday: Alabama Trust Bank, National
Association, became part of Southern States Bank, also of Alabama. Along those
lines, however, and on a much larger scale, the FDIC has put forth a plan for major financial firms whereby U.S.
regulators will seize the parent company but allow its units around the globe
to keep operating while “the mess” is cleaned up
. The equity stakeholders
of the large bank or other financial firm will be wiped out, and bondholders
will face losses as their holdings are swapped for equity in a new entity. If
several federal agencies and the Treasury Department agree to seize a firm, the
FDIC will unwind the parent bank holding company of the faltering firm, place
it in receivership and revoke its charter while the firm’s subsidiaries around
the world would continue to operate, and the FDIC would transfer most of the
firm’s assets and some of its liabilities into what’s known as a “bridge
company.” Watch for “orderly liquidation authority” to be the
buzz word if someone like a WAMU or a Lehman collapses again.

The Nationwide Mortgage Licensing System and
Registry (NMLS)
is a fact of life of many LO’s – 375,000 of them (and more
than 11,000 depository institutions and subsidiaries). By the end of 2011 NMLS
had registered 17,121 companies holding 22,124 active state licenses. 
There were 11,081 depository institutions and subsidiaries registered, and
116,991 individual MLOs holding 226,010 active state licenses in addition to
the federally registered MLOs noted above – the numbers make your head spin.

Chicago,
Las Vegas…and now Oakland, California? Despite the fact that bank’s don’t
even own properties in the earliest stages of foreclosure, the city of Oakland
has voted to require banks to register such homes and pay for upkeep. For
vacant homes, banks would have to pay a $568 annual fee, hire a property
manager and maintain the home and yard. Here is the story, which, if carried
out, directly hits servicing values and in turn the cost of a loan to borrowers
– more unintended consequences as municipalities reach for income.

The real
estate and mortgage industries are not done with seeing fraud as being a problem, or popping up in the headlines. Fraud is
a constantly moving target – there are some clever people out there who
unfortunately direct their talents against regulations. CoreLogic
pinpointed a few 2011 trends through its Fraud Index, including the
stabilization of “origination risk” which is down 75% from 2005 levels (largely
due to overall origination volume dropping) and “identity fraud” dropping due
to more stringent identity validation measures. Property fraud, however,
increased over 250% from 2010 to 2011 as a result of fraudulent flipping of
properties. And based on Mortgage Loan Fraud Suspicious Activity Reports
received by the Financial Crimes Enforcement Network (FinCEN), the volume of
mortgage loan fraud was on the increase. FinCEN, besides being hard to type,
received 92,028 MLFSARs in 2011, up from 70,472 in 2010 and consistent with the
increase observed from 2001.  Much of the activity reported actually
occurred some time ago, as 84% of incidences were more than two years old. In
terms of geographic trends, California
and Florida remained the states with the highest volume of mortgage loan fraud
,
while Illinois and New York swapped spots such that they’re now numbers 3 and
4, respectively.  The metropolitan areas of Chicago; Washington, DC;
Brooklyn, NY; Atlanta; and Jamaica, NY had the highest rates of fraud,
reporting a fraud index more than 30% higher than the rest of the country.

The Appraisal Institute responded to a
recent report released by the FinCEN
.
The group’s March 2012 Mortgage Loan Fraud Update showed that incidences of
mortgage fraud rose by 20% year-over-year between the third-quarter of 2011 and
the third-quarter of 2010. Commenting on the findings, Appraisal Institute’s president, Sara W. Stephens,
MAI, said, “These ongoing reports of fraud in the housing industry reinforce
the need for consumers and real estate professionals to rely on individuals
with not only the right experience, but the reputation and ethics to help guide
them through today’s uncertain marketplace.” Continuing its response, the AI reiterated
its commitment to fighting back against mortgage-related fraud. In an official
statement, the organization noted that between 2000 and 2011, “7.9 times more
nonmember appraisers than Appraisal Institute members received a disciplinary
action. Based on the most recent five-year averages, the AI represents 26% of
the entire U.S. appraiser population, but only 12.1% of all disciplinary
actions.”

When in
doubt, go to a training session! Fortunately there are many of them – too many
to list. But here is a start:

AllRegs will offer a training webinar
entitled, “The HARP II Program,”
tomorrow from 2-3:30PM EST. “In 2012, the HARP II program was announced to allow
lenders to deliver HARP loans without a cap on loan-to-value ratios. Making
changes to the LTV ratios is just one of the many changes to the revised HARP
II program. During this 90-minute webinar, we will look at all of changes to
this program and how they will impact those borrowers who were locked out of
refinancing to a lower rate based on previous LTV restrictions. To learn more
or register, click here or visit allregs.com.

A webinar on the FHA’s condominium
eligibility requirements
will take place on May 24th. This training
doesn’t cover the condo approval process, focusing instead on the latest
updates and basic requirements.  Go here 
to register. By the way, policies may be in a state of flux, making condo
project approvals easier.

For those interested in selling HUD REOs,
FHA-HUD will be putting on a webinar that covers the roles of Asset and Field
Servicers Managers, types of HUD home listings, electronic bidding, “incentive”
programs, and common delays.  Register here.

The FHA continues to provide basic loss
mitigation training
around the country for HUD-approved counseling
agencies, local servicing lenders, and nonprofits.  The training will be
available on May 23rd in Jacksonville, FL; June 5th in Greensboro, NC; June
14th in Louisville, KY and Chicago, IL; June 19th in Nashville, TN; and June
20th in Memphis, TN and Indianapolis, IN.  To register for any of the
trainings visit here
Loss mitigation webinars on overviews of HUD early delinquencies, home
retention options, disposition options for pre-foreclosure sale and
deed-in-lieu, SFDMS default reporting, servicer tools in HUD’s Neighborhood
Watch System, FHA claims, will be available from June 6th-July 18th and again
from August 1st to September 12th.

Out in
California, the CMBA‘s next monthly
conference call for its Mortgage Quality
and Compliance Committee
(MQAC) is coming up – for free! It is this
Thursday at 11AM PST, and the topic is “Simulated
HUD Audits.
” Contact Dustin Hobbs for more information at dustin@cmba .com.

(Speaking
of the CMBA, it is setting up its annual Western Secondary Marketing Conference
in San Francisco.)

The FHA will be hosting a class on the FHA
appraisal process and requirements
in San Antonio, TX on June 5th. 
The training covers protocol and recent update and counts towards seven hours
of Continuing Education for the state of Texas.  Registration is available here
Also in San Antonio, June 6th will be “A Day with FHA,” which covers a wide
spectrum of topics and case studies – bring your own donuts. Seriously, attendees
are to bring a calculator; register here.

In an alluring blend of bureaucracy and tropical heat, the FHA will be hosting two days of FHA Appraiser and Lender training
in San Juan, Puerto Rico on June 5th and 6th.   For more information
and to register, see this link.

The Georgia Real Estate Fraud Prevention and Awareness Coalition and the FHA
are hosting a training class on Sovereign
Citizens and Adverse Home Possession
: An Emerging Trend in Atlanta on June
6th.  Those interested can register here.

A webinar on selling HUD REOs is available on June 7th.  The training
covers a number of topics, including the role of Asset and Field Service
Managers, types of HUD home listings, and “incentive” programs.  Register
here.

For those interested in learning more about FHA loss mitigation, a webinar
series covering early delinquency, home retention, SFDMS default reporting,
HUD’s Neighborhood Watch system, and claims will available throughout the
summer.  The first rotation will be from June 6th to July 18th; the
second, from August 1st to September 12th. Visit HUD’s site for more
information.

Okay, that
is enough training. Here we are this morning – another week, another set of
U.S. economic news – very little of it news that would move rates. Tomorrow we
have Existing Home Sales; Wednesday holds in store New Home Sales and the FHFA
house price index. Thursday is Jobless Claims and Durable Goods, and the Friday
is some University of Michigan Consumer Sentiment index.

We’re
seeing a bounce in equity (stock) markets around the world, especially here in
the U.S. (In early trading Facebook is below its offering price.) The big
weekend event at Camp David, the G8, wound up being a relative non-event

The final communiqué can be seen here,
but it made vague references to adopting pro-growth measures and acknowledged
that individual countries might pursue their own different policies (revealing
a lack of consensus). Rates are a
shade higher, with the 10-yr at 1.73% and MBS prices are unchanged.

Two southerners are talking about ducks and dogs [pronounce the capital letters
separately]:
MR ducks
MR not ducks
OSAR
CM wangs
LIB
MR ducks!

MR dogs
MR not dogs
OSAR
CMPN
LIB
MR dogs!

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"Mega-Lenders" Lagging Smaller Ones in Processing Time

Small and medium-sized lenders and community banks appear to be closing loans for refinancing faster than their “mega-lender” counterparts according to the Origination Insight Report for April released Wednesday by Ellie Mae.  The company, which samples loan applications that are processed through its loan management software, reported that, “While the average refinance going through our platform took five days longer in April than in March, it still only took 47 days.”  Ellie Mae contrasted this to a report from The Wall Street Journal  which recently said that the largest retail lenders are now quoting timelines as long as 60 to 90 days for refinancing. 

Insight, which covers approximately 20 percent of U.S. loan originations, reported that the share of refinance applications actually dropped in April to 56 percent from 61 percent.  FHA Loans made up 28 percent of applications, unchanged from March and conventional loans 62 percent down from 64 percent.

Jonathan Corr, chief operating officer, said, “As we move into the spring and summer buying season, there was a significant pick up in the percentage of purchase loans; 44 percent in April up from 39 percent in March.  This is the highest level of purchase loans activity in the last nine months.”

The closing rate (defined as the applications received in the preceding 90 days that have closed) or “pull-through” rate for all loans in April was 48.1 percent, up from 46.9 percent in March.  For refinancing the rate was 44.7, up from 42.1 percent while the purchase rate was down from 56.4 percent to 55.2 percent.

The average loan that closed during April had a loan-to-value ratio (LTV) of 80, a FICO score of 745 and a debt-to-income ratio (DTI) of 24/35 compared to an LTV of 77, FICO of 749, and DTI of 23/45 in March. Applications that were denied had an average FICO score of 702, LTV of 87, and DTI of 23/43.  These numbers were all up slightly from the previous month.

There was very little difference between loan quality metrics for purchasing and refinancing with a convention loan, but the differences in FHA loans were significant.  The average FICO for refinancing into an FHA loan was 720 compared to 702 for a purchase.  The LTV was 87 versus 96, and the DTI was 26/39 compared to 27/41.

Loans that closed with an LTV over 95 percent represented 7.1 percent of conventional refis, up from 3.6 percent in March,  Corr said, “This has been slowly increasing since the HARP 2.0 announcement in October 2011, but correspondent lenders have only recently been able to run these loans through Desktop Underwriter and Loan Prospector.”

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March Loan Statistics Detailed in Ellie Mae Report

The second edition of a new report looking in depth at the mortgage origination market was released today by Ellie Mae.  The report for March reviews and compares data amassed from loan applications in its database for March compared to February 2012 and September and December 2011.  Ellie Mae States that there were two million loan applications processed through its systems in 2011 and the survey is based on a “robust” sample of those applications. 

The report outlines the characteristics of the loans for each of the four monthly periods.  Because of the volume of data contained in the report, we will summarize figures for February and note any substantial variations from the three earlier periods.

Sixty-one precent of loans originated in March were for the purpose of refinancing, about the same as three and six months previous but down from 67 percent in February.  FHA-backed loans accounted for 28 percent and conventional loans for 64 percent of the total compared to 25 percent and 67 percent in February.  A typical loan regardless of its purpose took 42 days to close in March, about the same as in February but down three to five days from December. 

The majority of loans were 30-year fixed-rate loans (FRM) but 20.2 percent were 15 year notes and 4.2 percent were adjustable rate mortgages (ARMs.)  The incidence of ARMs has decreased in each of the reporting periods since September when they had a 6.0 percent market share.  The average note rate for a 30-year FRM has declined steadily from 4.412 in September to 4.080 in March.

Ellie Mae calculated a “pull-through” rate for a sampling of loans for which applications had been submitted 90 days earlier.  The pull through for March was 47 percent with a higher percentage (56.4 percent) of purchase mortgages closing than loans for refinancing (42.1 percent.

The average loan closed in March had a FICO score of 749, a loan-to-value (LTV) ratio of 77 percent and a debt-to-income (DTI) ratio of 23/35.  A loan that was denied had a FICO on average of 699, an 85 percent LTV, and a DTI of 27/43.

 Jonathan Corr, chief operating officer of Ellie Mae said of the closed loan statistics, “In March, as we moved into the Spring selling season, underwriting standards for both purchase and refinance loans continued to be highly conservative.  The average loan denial in March still had a FICO score just shy of 700, and more than 15% in equity or a down payment.  On average, there was an 8-point spread between back-end DTI ratios for approved-versus-denied loans last month.”  Average denials for conventional refinances and purchases, he said, continued to have significantly higher FICOs, lower LTVs and more restrictive DTIs than the overall averages.

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Ellie Mae’s New Origination Report Reflects Tightening Credit Standards

A new monthly report on the state of the mortgage origination market has been initiated by Ellie Mae, a company which provides software and a mortgage origination network to mortgages originators.  The first report reviews and compares data amassed from loan applications in its database, for the months of August and November 2011 and February 2012.  Ellie Mae states that there were two million loan applications processed through its systems in 2011 and the survey is based on a 33 percent sample of those applications.

The report outlines the characteristics of the loans for each of the three months.  Because of the volume of data contained in the report, we will summarize figures for February and note any substantial variations from the earlier two periods.

Of loans originated in February, 67 percent were for the purpose of refinancing and 33 percent for purchase; 25 percent were for FHA backed mortgages and 67 percent for conventional loans.  Just under 20 percent of applications were for 15-year fixed-rate mortgages (FRM), a number that was fairly consistent across all three periods, but the share of adjustable rate mortgages (ARM) dropped by nearly 50 percent from August to February when ARM applications represented only 4.3 percent of applications.

To get a meaningful view of lender “pull-through”, Ellie Mae reviewed loan applications initiated within the previous 90 days to calculate a closing rate and found that nearly 48% of all applications closed. There were a higher percentage of purchase mortgages closing (60%) than refinances (42%).

The average loan took 44 days to close with refinanced loans averaging 48 days and purchase loans 44 days.  Closed loans had an average FICO score of 750 while loans that were denied averaged a FICO of 699.  Closed loans had a loan to value (LTV) ratio of 76 and a debt-to-income (DTI) ratio of 23/34 while denied applications averaged an LTV of 83 and a DTI of 28/44. 

There was substantial variation in these numbers for FHA vs. conventional loans that were accepted or denied.  Denied conventional applications had an average FICO of 720, LTV of 77 and DTI of 27/43 for refinancing and 732, 81, and 24/41 for purchase applications.  Applications denied for FHA refinancing had average FICOs of 667, LTVs of 87 and DTIs of 29/46 and for purchases 666, 94, and 40/46. 

There were also considerable differences between the characteristics for conventional loans that were closed and those that were denied with LTVs several points higher and back-end DTIs 10 to 12 points higher for denied loans and FICO scores around 50 points lower.  However, the only real difference between closed and denied FHA loans was the FICA scores, 55 points for refinances and 35 points for purchases.

February figures reflected some tightening of standards over the three periods in the study.  FICO scores on closed loans of all types rose 9 points over August figures while average LTV ratios were down 3 points and both front and back end DTI scores were 2 points lower.

 “In February, it appears that lenders continued to be very cautious in terms of credit quality, down payments and valuations,” said Jonathan Corr, chief operating officer of Ellie Mae. “The average credit score on closed loans was 750 last month, up from 740 six months ago; meanwhile, the average loan-to-value ratio was 76%, a decrease of 3% from August’s average.

“If you look at the full report on our website, you’ll see the impact of the higher underwriting requirements for refinance that were in place in February,” Corr said. “Last month, if your FICO score was below 720 or you had a down payment or equity of less than 25%, there was a good chance that your refinance application for a conventional loan was denied or you were offered a significantly less attractive interest rate. The average DTI ratio for such a denial in February was 27/43.

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