Refinance Share of Mortgage Market Enjoys Return to Form in January, Ellie Mae Says

Mortgage MarketMortgage refinancing is still far from its halcyon days of 2013, but the refinance market did grow significantly in January, as mortgage interest rates dropped to their lowest levels in more than a year and a half. Also revealed in the Ellie Mae report were a number of interesting statistics, including closing rates for purchases and refinances, as well as average credit scores for closed and denied mortgage loan applications.

This was revealed Wednesday in a new report from Ellie Mae, which took a random sampling of loans originated on its mortgage platform. According to the company, refinances took up 51 percent of all mortgage loans in January, or 8 percent more than December’s 43 percent share. This put refinancing at its highest share in over one year and a half, similar to how the refinance share of mortgage applications made a strong comeback in the Mortgage Bankers Association’s reports for January.

According to Ellie Mae Chief Executive Jonathan Corr, the refinance comeback was mainly driven by borrowers taking advantage of the ultra-low mortgage rates in early 2015 after sitting the fence in 2013, or the last time interest rates were this low. 30-year fixed-rate mortgages averaged 4.15 percent in January, per Ellie Mae’s numbers – this is considerably higher than the rates reported by Freddie Mac, Zillow, and other sources, but still the lowest on the company’s records since July 2013. Corr noted that consumers who were not able to refinance due to a lack of equity in their homes are also “getting a second chance” this year.

Although, refinance share statistics were up substantially in Ellie Mae’s report for January 2015, the average time it took for refinances to close was down from 42 days in December to 39 in January; this matched 2014’s average for the entire calendar year. The average time it took for purchase loans to close dropped from 42 days in December to 40 days in January; this is one day less than 2014’s annual average of 41. Talking about closing rates for purchase and refinance loans, the figure improved by over two percentage points, kicking off 2015 with a rate of 62.4 percent.

Refinance closing rates were particularly improved, jumping over five percentage points to 56.5 percent, while purchase closing rate increases were more modest, as this figure finished January 2015 at 68.3 percent.

Ellie Mae’s analytics also included some data on FICO scores (“credit scores”) and loan-to-value ratios of consumers whose loans were closed in January. The average FICO score for closed mortgage loans increased from 728 in December 2014 to 731 in January 2015. The average LTV ratio, on the other hand, slipped one basis point from 80 percent to 79 percent.

Approximately 30 percent of closed loans carried FICO scores of less than 700; this was down from 32 percent of all closed loans for the month of December 2014. As for denied loan applications, consumers averaged a 681 FICO score in January, marking a slight uptick from December’s numbers.