Understanding The News: How Long Does It Take To Close A Loan?

*How Long Does It Take To Close A Loan?*
**New Research Sheds Light on Cycle Times**

***Ellie Mae released its Origination Insight Report for May 2012. The report draws its data and insights from a sampling of the significant volume of loan applications—more than 20% of all originations in the United States—that flow through Ellie Mae’s Encompass360 mortgage management software and Ellie Mae Network. Here’s the scoop on cycle times, volume, and much more:

****“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.”

****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 (see full report).

****“As you’d expect in the Spring sales season, the percentage of purchase loans increased to 46%, their highest level of the year,” noted Corr. “Credit scores for closed loans decreased slightly to 744 in May, with the biggest drop in FHA refinances, where the average credit score declined to 713 in May from April’s average of 720.

****“The combination of record-low interest rates, flexible HARP 2.0 refinances and a growing perception that housing prices finally may have bottomed are all creating increased demand—and slightly longer waits—for mortgages,” said Corr. “In May, the average loan closed in 46 days, one day longer than in April; and the average refinance also took one day longer, or 48 days, to close.”

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