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Refinancing On The Rise For Millennials As Interest Rates Decrease

Over the last year, a dramatic drop in interest rates on 30-year notes has led to an active refinance market for millennials. According to the latest Ellie Mae Millennial Tracker, interest rates on all 30-year notes fell from 4.86% in June 2018 to 4.39% in June 2019. This figure marks the lowest average rate for borrowers of this generation since January 2018. Millennials were quick to take advantage of the lower rates and the share of refinances increased from 8% to 14% of all loans closed by members of this generation during the same period. 


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Among all 30-year loans closed by millennials, interest rates on VA loans had the largest year-over-year decrease, dropping more than half a point from 4.54% to 3.97%. Rates on FHA loans fell from 4.93% to 4.49% while rates on Conventional loans saw a near half-point reduction, from 4.84% to 4.35%.


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From June of last year to June 2019, share of refinances among millennials rose in all three major loan categories. Twenty-seven percent of VA loans were refinances this June compared to 18% the year prior. The share of millennials refinancing FHA loans increased from 4% to 6% over the last year and the share of Conventional refinances jumped from 9% to 17%.


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“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” said Joe Tyrrell, chief operating officer at Ellie Mae. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will effect consumer behavior, including millennials who look to lower their payments.” 


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While shares of FHA and VA loan refinances are up in June 2019 compared to June 2018, the overall share of FHA loans has decreased, and the share of VA loans has remained flat. FHA loans accounted for 27% of all loans closed by millennials in June 2018, but that figure fell to 24% a year later. Shares of VA loans remain unchanged at 2%.

“There is and has been a massive opportunity for lenders to educate potential homeowners on the loan options available to them,” added Tyrrell. “For example, borrowers with lower FICO scores can take advantage of FHA loans to make homeownership a reality, but the overall awareness that this loan type exists needs to increase.”

With an increased investment in technology, time to close has dropped across the board year-over-year. Average time to close on all loans for millennials has dropped two days while average time to close on refinance and purchase loans has dropped four days and one day, respectively. 

Mortgage Credit Availability Increased In April

Mortgage credit availability increased in April according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from Ellie Mae’s AllRegs Market Clarity business information tool.

The MCAI rose 2.1 percent to 186.0 in April. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI increased (4.3 percent), while the Government MCAI was unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 6.8 percent, and the Conforming MCAI increased by 1.2 percent.


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“Credit supply increased 2 percent in April and was driven by a 7 percent gain in the jumbo index, which reached its highest level since the beginning of the MCAI in 2011,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Additionally, investors continued a trend from March of further increasing their willingness to purchase more non-QM and non-agency jumbo loans. The high-end of the purchase market had shown weakness earlier this year, before the recent decline in mortgage rates, and it appears investors are trying to remain competitive in that segment of the market.” 

CONVENTIONAL, GOVERNMENT, CONFORMING, AND JUMBO MCAI COMPONENT INDICES

The MCAI rose 2.1 percent to 186.0 in April. The Conventional MCAI increased (4.3 percent) while the Government MCAI was unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 6.8 percent while the Conforming MCAI increased by 1.2 percent.


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The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.


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The Conforming and Jumbo indices have the same “base levels” as the Total MCAI (March 2012=100), while the Conventional and Government indices have adjusted “base levels” in March 2012. MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the “base period”) relative to the Total=100 benchmark.                                                       


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EXPANDED HISTORICAL SERIES

The Total MCAI has an expanded historical series that gives perspective on credit availability going back approximately 10-years (expanded historical series does not include Conventional, Government, Conforming, or Jumbo MCAI). The expanded historical series covers 2004 through 2010, and was created to provide historical context to the current series by showing how credit availability has changed over the last 10 years – including the housing crisis and ensuing recession.  Data prior to March 31, 2011, was generated using less frequent and less complete data measured at 6-month intervals and interpolated in the months between for charting purposes. Methodology on the expanded historical series from 2004 to 2010 has not been updated.

Millennials Closed Loans At The Fastest Rate In Over Four Years

With interest rates for 30-year mortgages declining, Millennials moved quickly to close their mortgages in March 2019. According to the latest Ellie Mae Millennial Tracker, the average 30-year note rate dipped to 4.75%, down from 4.85% in February, and the lowest percentage since April 2018. At the same time, average time to close for all loans dropped to 40 days, marking the shortest closing period since February 2015.


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Overall, Millennials closed all loans two days faster month-over-month and the trend was consistent for both refinances and purchases. On average, refinances took 42 days to close in March, 11 days faster than the month prior, while time to close a purchase shrunk from 45 to 39 days.


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The decrease in interest rates on all 30-year loans was driven in large part by month-over-month interest changes for 30-year conventional loans, which on average decreased from 4.81% to 4.7%, and VA loans, which fell from 4.47% to 4.36%. FHA loan average interest rates decreased from 4.85% to 4.84% during the same time period.


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“Homebuying tends to pick up in the spring and lower interest rates are intensifying this trend among Millennials,” said Joe Tyrrell, executive vice president of strategy and technology at Ellie Mae. “Likewise, lower interest rates are providing increased purchase power to Millennials, allowing them to participate in a very competitive home buying market.”


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The Millennial Tracker data echoes findings from the Ellie Mae March Origination Insight Report, which also found a decrease in time to close and a drop in 30-year note interest rates across loans to all borrowers.

For all loans closed by Millennials in March 2019, 68% were Conventional and 28% were FHA, while VA and other loans accounted for 2% and 3% respectively. Among FHA loans, purchases increased to 95% in March, up from 89% the month prior. Alternatively, among Conventional loans, share of purchases fell to 85%, down one percentage point from February.

30-Year Fixed Rate Drops, Refis Tick Up Slightly

According to the March Origination Insight Report from Ellie Mae, the 30-year note rate dropped for the third straight month to 4.77 percent, down from 4.86 percent in February and 5.01 percent in January. The percentage of refinances on all loans increased to 35 percent, up from 34 percent the month prior.


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“As we enter the busy spring home buying season, we are seeing activity tick back up across the board with the 30-year note rate decline,” said Jonathan Corr, President and CEO of Ellie Mae. “We will continue to watch closing rates as they have stayed at or above 75 percent through the first quarter of 2019, a possible indication of buyers’ conviction.”


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Other statistics of note in March included:

The percentage of FHA refinances increased to 23 percent in March, up from 20 percent in February.


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Time to close all loans continued to decrease. Time to close all loans was 42 days in March, down from 43 in February and 45 in January. The time to close a purchase loan dropped to 45 days in March, down from 47 in February and 49 in January.

The percentage of Adjustable Rate Mortgages (ARMs) decreased to 7.4 percent, down from 7.6 percent in February.


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The Origination Insight Report mines data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

In addition to the Origination Insight Report, Ellie Mae also distributes data from its monthly Ellie Mae Millennial Tracker on the first Wednesday of each month. The Ellie Mae Millennial Tracker focuses on mortgage applications submitted by borrowers born between the years 1980 and 1999.

WebMax Partners With Ellie Mae To Improve Loan Efficiency

WebMax, a digital mortgage solution provider, has integrated with Ellie Mae. While WebMax provides digital mortgage solutions that significantly impact a lender’s greatest needs, Ellie Mae has the ability to help ensure the highest levels of compliance, quality and efficiency.


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Kelcey Brown, Chief Strategy Officer and EVP of WebMax says, “WebMax is excited to form an official partnership with Ellie Mae; We feel that through Ellie Mae’s support, our Encompass integration will be enhanced significantly, and will be able to provide our customers with seamless bi-directional connectivity with the loan origination system and a superior digital mortgage experience.”


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The recent partnership provides WebMax clients a quick and secure transfer of data between Ellie Mae’s Encompass Platform and WebMax’s digital mortgage application, Start. The direct bi-directional integration with Ellie Mae allows lenders on WebMax’s platform to access their entire loan pipeline, meaning they can see where their loans stands during every stage of the approval process. Additionally, they can run credit and pricing, view appraisals, and send pre-approval letters from their mobile device in real-time through the Encompass platform.


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The partnership between Ellie Mae and WebMax will help lenders reduce origination costs, increase loan volume, and decrease closing times. In turn, lenders will prove to be more efficient and productive throughout the loan approval process, allowing them additional time to formulate relationships with borrowers and realtors. This will result in increased satisfaction for homebuyers due to a more seamless process.


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WebMax believes that home buyers need a simpler, faster way to acquire a mortgage. In order to achieve this, WebMax provides digital mortgage software solutions designed to deliver a superior consumer borrowing experience while reducing the loan manufacturing cost. With products spanning the entire digital mortgage process, from the first borrower click to the last lender approval, WebMax seeks to make sense of the digital-first regulatory-ridden mortgage Industry for borrowers and lenders alike.

Partnership Streamlines Home Equity Loan Valuations

CoreLogic has integrated its OnSite property condition reports on the Ellie Mae Encompass all-in-one mortgage management solution. OnSite is a property condition report coupled with local market conditions and patent-pending features that are specifically designed to help institutions meet the Federal requirements when an Automated Valuation Model (AVM) is used for mortgage lending purposes.


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“Organizations are always looking for ways to improve efficiencies during the valuations process, particularly during the home equity lending process,” said Jonathan Nutting, senior leader, Valuation Operations, for CoreLogic. “As the first integration of its kind on Encompass, users will now be able to easily incorporate this solution into their existing workflows, saving them time and money in instances where an appraisal is not necessary.”


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OnSite is designed to help lenders comply with federal guidelines surrounding the verification of the physical condition of a property. In some home equity lending situations, OnSite can be leveraged with an AVM in lieu of an appraisal. All Onsite reports use a patent-pending algorithm to create an objective overall condition rating that supports the lender’s valuations processes.


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This integration also allows users to access OnSite Plus – a property condition report for situations where a licensed real estate broker or agent is required to gain access to a property, or when a local expert is needed.


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OnSite joins 15 other CoreLogic products currently integrated in the Encompass platform, including CondoSafe condo lending solutions, Instant Merge – the nation’s most popular 3-bureau merged credit reporting solution, flood determinations, Property Tax Estimator, LoanSafe Fraud Manager, LoanSafe Risk Manager, appraisal management services via Mercury Network, Merge Plus credit supplements, 4506-T Direct, FinalCheck LQI Compliance, automated valuation models, SSN Verification and several services within the Ellie Mae Total Quality Loan.

CoreLogic is a property information, analytics and data-enabled solutions provider. The company’s combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services.

Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific.

Ellie Mae Program Gets Early Adopters

Ellie Mae announced the early-adopters of the Ellie Mae Integrated Partner Program. The Integrated Partner Program was first announced in October of 2018 and already includes a number of Independent Software Vendors and Developers, further growing the capabilities offered on the Ellie Mae Encompass Digital Lending Platform.


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The program provides Ellie Mae lenders with innovative, sanctioned and easily implemented integrations for the mortgage lending process. Some of the early adopter solutions include quality assurance (QA) and quality control (QC), business analytics, robotic process automation (RPA), document management, customer relationship management (CRM) and optical character recognition (OCR).


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This program means more efficient workflows and business processes can be easily implemented to help lenders engage and acquire more prospective homebuyers, originate and close loans more efficiently, lower the cost of origination and fund and sell loans faster to ensure a steady flow of capital. 


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Through the Integrated Partner Program, partners leverage Ellie Mae’s APIs to develop secure widgets, apps and next-generation integrations including business rule analyzer, lock reconciliation, data extract and pipeline highlighter.


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The Integrated Partner Program early adopters include:

AI Foundry– AI and ML-based cognitive business automation and Agile Mortgages solution 

Capsilon, Capsilon IQ – Intelligent Process Automation, leveraging Data and Document extraction technology

Digital Risk, LuminateT – Automatic Document Recognition, OCR and RPA solutions

focusIT, Pulse CRM for Mortgage Professionals: A lead and marketing management system 

Silverline, a Salesforce Platinum Partner – Salesforce/Encompass Digital Lending Platform integration

Tabrasa  – marketing automation, CRM, real-time market insights, print and custom branded merchandise solutions  for mortgage clients

TRK Connection, cloud-based Insight Risk and Defect Management – Quality Control audit platform

Whiteboard Technologies, LLC, Powered by The Mortgage Playbook, is the scalable CRM for LO’s, Teams and Enterprise

“We are excited to offer more trusted integrations via our Encompass Digital Lending Platform through Ellie Mae’s Integrated Partner Program and Marketplace,” said Parvesh Sahi, senior vice president of business development, Ellie Mae. “For our partners, this new program provides the opportunity to build and deploy fully tested, scalable API integrations to more efficiently reach our network of lenders. For our lenders, integrations with these leading edge business software and systems providers enable a more efficient workflow, furthers mortgage innovation and delivers on the promise of a true digital mortgage.”

For more information about Ellie Mae’s ISV Partner Program or to become a member, visit https://explore.elliemae.com/independent-software-vendors

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Partnership Furthers A More Digital Process

FirstClose, a provider of technology solutions for mortgage lenders nationwide, announced that its reporting suite is now available through Ellie Mae’s Encompass digital mortgage solution. The seamless integration allows lenders to order FirstClose’s solutions directly through Encompass to drive quality and efficiency in the loan origination process.


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Services can be ordered directly from Encompass at the touch of a button, eliminating duplicate key strokes when placing orders. When orders are returned, data points are sent back to Encompass, which automatically populates critical fields such as the full legal description and vesting information from the title work, the appraised value from the valuation product selected, and more. Copies of the completed reports are automatically imaged into Encompass. The integration reduces human error, as well as costs and closing times.


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Ellie Mae is a provider of innovative on-demand software solutions and services for the residential mortgage industry. Ellie Mae’s Encompass digital mortgage solution provides one system of record that enables banks, credit unions and mortgage lenders to originate and fund mortgages and improve compliance, loan quality and efficiency.


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“Seamless integration between the LOS and valuation and settlement services helps lenders close loans more quickly and efficiently,” said FirstClose CEO Tedd Smith. “Our secure integration with Encompass enables our clients to simplify the process of ordering our solutions, so they can more easily process mortgage loans and grow their business. We look forward to a long, successful relationship with Ellie Mae.” 


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FirstClose is a provider of best-in-class property & borrower data intelligence and settlement services nationwide. The company specializes in delivering a powerful web app and LOS plugin that is a home equity and refi tool that offers everything from application to servicing (credit score, valuation, title, tax, flood, closing and recording) on one easy-to-navigate platform.

In addition, the company delivers simplified vendor management by consolidating vendors and products on one platform.   FirstClose makes it easy to identify and repair the gaps where lender profits can be maximized.

ARMs Hit Eight-Year High

According to the December Origination Insight Report from Ellie Mae, the percentage of Adjustable Rate Mortgages (ARMs) reached 9.2 percent, the highest percentage in 2018 and since Ellie Mae began tracking data in 2011. This is up from 8.9 percent the month prior and the 2018 low of 5.5 percent. 


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The increase in ARMs continues to be correlated to the 30-year rate, which rose to 5.17 for loans closed in December, up from 5.15 the month prior. For FHAs, the 30-year rate increased to 5.20, Conventional rates increased to 5.19 and VA rates rose to 5.01.


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“With the strong demand for housing and the rapid increase in property value appreciation, more consumers are turning to Adjustable Rate Mortgages in order to gain additional flexibility when competing for a home,” said Jonathan Corr, president and CEO of Ellie Mae. “This is another key indication of how demand has outpaced supply in the housing market as consumers pursue their dream of homeownership.”


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Other statistics of note in December included:

>>The time to close all loans increased to 47 days in December, up from 46 days in November. Time to close a purchase loan decreased to 47 days, while time to close a refinance increased to 44 days. 


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>>The percentage of purchase loans rose to 71 percent of total loans in December, up from 70 percent the month prior.

>>Overall FICO scores dropped one point to 726. LTV held at 79 for the fifth month and DTI held at 26/39.

The Origination Insight Report mines data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

In addition to the Origination Insight Report, Ellie Mae also distributes data from its monthly Ellie Mae Millennial Tracker on the first Wednesday of each month. The Ellie Mae Millennial Tracker focuses on mortgage applications submitted by borrowers born between the years 1980 and 1999.

Adjustable Rate Mortgages Reach A High

 According to the November Origination Insight Report from Ellie Mae the percentage of Adjustable Rate Mortgages (ARMs) reached 8.9 percent, the highest percentage since Ellie Mae began tracking data in 2011.


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The increase in ARMs is directly correlated to the 30-year rate, which rose to 5.15 in November, up from 5.01 the month prior. For FHAs, the 30-year rate increased from 5.05 in October to 5.19 in November. Conventional rates increased from 5.03 in October to 5.17 in November, and VA rates rose from 4.83 to 4.99.


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“As interest rates continue to rise, we are seeing the percentage of Adjustable Rate Mortgages rise in lockstep, and this month they’ve risen to the highest percentage we’ve seen since we began tracking data,” said Jonathan Corr, president and CEO of Ellie Mae. “As expected, we are also continuing to see the percentage of refinances remain low—30 percent in November—due to higher interest rates.”


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Other statistics of note in November included:

The time to close all loans increased to 46 days in November, up from 45 days in October. Time to close a purchase loan increased to 48 days, up from 46 days in October, while time to close a refinance remained at 43 days for the second consecutive month.

The percentage of purchase loans rose to 70 percent of total loans in November, up from 68 percent the month prior.

Overall FICO scores remained steady at 727 in November for the third month. LTV held at 79 for the fourth month, and DTI held at 26/39 for the second month.

The Origination Insight Report mines data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

In addition to the Origination Insight Report, Ellie Mae also distributes data from its monthly Ellie Mae  Millennial Tracker on the first Wednesday of each month. The Ellie Mae Millennial Tracker focuses on mortgage applications submitted by borrowers born between the years 1980 and 1999.