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Closing Rate Inches Up Slightly

To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the October 2013 applications) to calculate an overall closing rate of 54.9% in January 2014, up slightly from 54.3% in December 2013. Here’s what else the origination vendor’s January Origination Insight Report found:

“The purchase-to-refinance mix remained relatively steady in January 2014, with just a 1% change from December,” said Jonathan Corr, president and chief operating officer of Ellie Mae. “Credit requirements continued to loosen as we entered the new year. The average FICO score for all closed loans dropped to 724 in January 2014, down three points from 727 in December 2013. Last month, 32% of closed loans had FICO scores below 700, compared to 23% in January 2013.

“The percentage of ARM loans increased to 7.2%. This was the fourth month in a row that we have seen this shift and the highest level since August 2011 (8.3%). Typically, borrowers move to ARMs as a way of stretching their buying power,” continued Corr.

The report draws its data and insights from a robust sampling of the significant volume of loan applications that flow through Ellie Mae’s Encompass mortgage management software and the Ellie Mae Network. The Origination Insight Report mines its application data from a robust sampling of approximately 57% of all mortgage applications that were initiated on the Encompass origination platform.

“For a third consecutive month, HARP-related refinancing activity increased. Conventional refinances at 95%-plus LTV rose to 14.3% in January 2014, the highest they’ve been since we began tracking this data in October 2011,” Corr noted.

“Meanwhile, the average time to close a loan hit 45 days last month, up from 43 days in December 2013. This was most likely due to the holiday season and lenders adjusting to the new Ability-to-Repay and Qualified Mortgage regulations that took effect Jan. 10, 2014.”

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Closing The Page On 2013

Origination vendor Ellie Mae released its Origination Insight Report for December 2013, as well as an infographic of key mortgage statistics and trends for 2013. The report draws its data and insights from a robust sampling of the significant volume of loan applications that flow through Ellie Mae’s Encompass LOS and the Ellie Mae Network.

“Purchases represented 54% of closed loans in December 2013, which was double the share of at the beginning of the year,” said Jonathan Corr, president and chief operating officer of Ellie Mae. “Meanwhile, refinances ticked up by 1% over November to 46% in December, helped in part by the average 30-year note rate staying below 4.6%.”

To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the September 2013 applications) to calculate an overall closing rate of 54.3% in December, up from 53.1% in November 2013.

“HARP-related refinancing activity increased for the second month in a row, as conventional refinances at 95%-plus LTV rose to 12.1% in December, the highest they’ve been since August 2013,” said Corr.

The Origination Insight Report mines its application data from a robust sampling of approximately 57% of all mortgage applications that were initiated on the Encompass origination platform. Given the size of this sample and Ellie Mae’s market share, the Company believes the Origination Insight Report is a strong proxy of the underwriting standards that are being employed by lenders across the country.

Corr added, “2013 closed with the loosest credit requirements of the year. The average FICO score for all closed loans last month was 727, 11 points below the 2013 average of 738 and 21 points lower than December 2012, when the average was 748. Last month, 31% of closed loans had FICO scores below 700, compared to 21% in December 2012.

“In addition, both back-end DTI (39%) and average LTV (82%) for December were at their highest points for 2013.”

TLI214-Ellie-Mae-Infographic

Progress In Lending
The Place For Thought Leaders And Visionaries

My Mortgage Experience, Part 2

A few columns back I wrote that my wife and I were in the home stretch of refinancing our mortgage through the HARP program after several years of being told we weren’t eligible. Well, I’m happy to report that we closed on the loan a couple of weeks ago and now will be able to pay off our mortgage in half the time we would have been able to do under our old loan, saving tens of thousands of dollars in the process.

Unfortunately, we could have saved a whole lot more if we had been able to refi a few years ago, when HARP was first rolled out. If only I knew then what I know now.

In that earlier column, I noted that “one of the reasons we had trouble knowing if we were eligible for HARP was because it was difficult to know for sure if Fannie or Freddie owned the loan in the first place. You can use Fannie or Freddie’s website to check, but unless your address matches up exactly with theirs, you won’t get an accurate answer.”

It turns out I didn’t know the half of it. I had no idea just what a big mess an incorrect address really is and what lengths you have to go through to fix it.

While calling Sports Illustrated or Ducks Unlimited to correct your address takes one telephone call to a customer service rep, Fannie Mae requires a full “support team” to do this. And this “support team” meets all of once a month.

If you live in a condominium, like I do, or a co-op with a unit or apartment number, you’re much more likely to run into this predicament. And that can “wreak havoc in terms of refinancing or purchasing a home,” said Paul Anastos, president of Mortgage Master Inc. in Walpole, MA, where I got my refi. “It was a pretty big deal getting it changed so we could even do it.”

“Something as simple as a condo being listed as Unit 512 rather than #512 can result in the system identifying this as a loan that is ineligible for HARP,” says Patrick Ruffner, branch manager for Guaranteed Rate in Chicago. “While an instance like that is an easy one to correct by updating the file internally with the lender refinancing the loan, there are instances that are more difficult to solve.” Like mine, apparently.

“The biggest problem is these updates are processed once a month at the end of the month,” Ruffner says. “The borrower is stuck in limbo until Fannie/Freddie have updated their systems. Therefore, the borrower will be unable to move forward with their refinance until this has been corrected. Depending on when the current servicer asks the agencies to update the address, this can take weeks up to months to be corrected.”

“If it is within the last week of the month, they may push this correction to the following month, thus delaying the process further. This leads to a borrower that is unable to lock in a rate and move forward with the refinance until it has been updated in the relevant system. In a time when interest rates are volatile and every day could result in an increase of those rates, this can put the borrower’s savings in peril.”

“There definitely isn’t a sense of urgency,” said Anastos. “They make it much more difficult than they need to.”

Fannie Mae told me repeatedly that it didn’t own my loan, although my mortgage servicer insisted (correctly) that it did. I put every variation of my address I could think of into Fannie’s search engine and repeatedly came up with nothing. I even called Fannie by phone and spoke to a human being who told me they didn’t own the loan. It turns out that the address Fannie had for me wasn’t even close to the one the Post Office or my servicer recognizes.

(This, of course, begs the question: If Fannie Mae didn’t own my loan, where had my servicer been sending my principal and interest payments to every month for the past seven years?)

I called and emailed Fannie Mae at least four times to get a response for this column but never got one. For its part, Freddie Mac says it can make a “post-funded data correction,” as it’s called, in six to eight days, at any time of the month, provided the servicer has the proper documentation.

As Ruffner notes, a simple problem like this costs real money. I’d been trying to refi through HARP ever since it was first introduced in 2009. So I’ve been paying about twice the market rate for my loan over the past four years, which I assume cost me in the tens of thousands of dollars in extra interest.

Anastos brought up another point, which should make Fannie and Freddie and their lender partners stand up and take notice.

“A dishonest person could have tried to make a case that they shouldn’t have to repay the mortgage,” he said. Indeed, many borrowers faced with foreclosure tried that tactic, and some were successful.

I’m too honest a person to have attempted that. But I was sure angry enough to think about it.

Isn’t it reassuring to know that the same government that can’t fix a simple thing like your address now wants to fix your health insurance?

About The Author

[author_bio]

George Yacik has been a financial writer for more than 30 years. After working 12 years at The Bond Buyer and American Banker as a reporter and editor, he joined SMR Research Corp. as a vice president, where he was the lead research analyst and project leader for SMR's studies on residential mortgages and home equity lending. Since 2008 he has been writing for a variety of mortgage-related and financial publications. George is based in Stratford, CT, and can be reached at gyacik@yahoo.com.

The Purchase Market Is Here

*The Purchase Market Is Here*
**By Tony Garritano**

TonyG***We’ve seen rates rise and we’ve seen refinances decline. The purchase market that everyone has been predicting is just starting to take hold. According to the July Ellie Mae Insight Report, purchase activity went up in the month of July as underwriting moderated. Here’s the full picture:

****“In July, the mix of purchase loans to refinances was 53% versus 47%: the largest percentage of purchase loans since we began tracking the data in August 2011,” said Jonathan Corr, president and chief operating officer of Ellie Mae. “This was a further indication that housing seems to be improving.

****“One part of the refinance market, HARP-related high LTV refinances (95% or more), had a resurgence, rising more than three percent to 11.1% in July 2013, compared to 8.0% in June 2013,” he noted.”

****To get a meaningful view of lender “pull-through,” Ellie Mae reviewed a sampling of loan applications initiated 90 days prior (i.e., the April 2013 applications) to calculate an overall closing rate of 55.4% in July 2013, up from 54.3% in June 2013. The report draws its data and insights from a robust sampling of the significant volume of loan applications—more than 20% of all originations in the United States

****“Credit standards continued to ease in July,” added Corr. “The average FICO score fell to 737, from 742 in June 2013, and it is now at the lowest level since we began our tracking in August 2011. Similarly we saw slight increases in both loan-to-value and debt-to-income ratios last month—signs that lenders are willing to accept slightly more risk to maintain volume.

****“As the average 30-year fixed rate increased to 4.357% in July, ARM products have predictably become more popular, now 5.2% of closed loans, up from 4.0% in June,” Corr concluded.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

LOS Helps HARP Initiative

*LOS Helps HARP Initiative*
**By Tony Garritano**

TonyG***In light of the recent announcement by the Federal Housing Finance Agency (FHFA) to extend the Home Affordable Refinance Program (HARP) through 2015 for borrowers of GSE loans, I have learned that one LOS has already stepped up to help lenders and servicers get the most out of this news. Xetus has launched a Subordination Management Platform that enables lenders to transform a traditionally paper-intensive, error-ridden experience into an automated, streamlined, collaborative process. Here’s the scoop:

****Xetus President and CEO Scott Stein says a process that typically takes more than twenty days to perform—from subordination request to subordination approval or decline—now requires fewer than eight days, and as little as two days for an LPS Streamline request. The improvement sets up the opportunity for lenders to create a true profit center amid the refinance boom—driven by a low-interest-rate environment—that has produced a constant need for subordinations.

****“XetusOne’s Subordination Management Platform provides lenders with a private-labeled web page that is integrated directly into their website, taking on the identical branding, look, and feel,” he says. “Its automated capabilities allow parties to collaborate around an electronic folder containing all the information needed—such as the commitment letter, title report, CLTV, line limit, and line balance—to push the request to approval.” Once a requestor enters basic information through the intuitive interface of the web portal, the XetusOne Subordination Management Platform retrieves information from service providers, including an updated FICO and appraisal, and is able to use embedded rules and logic to make an automated recommendation.

****While some experts suggest the refinance rush may be on the wane, which would subsequently stem subordinations, this announcement, along with pending legislation, continues to feed refinance volume. For instance, HARP, first introduced by FHFA and the Department of Treasury in April 2009 and previously set to expire at the end of this year, has contributed to the refinance boom, with more than 2.2 million refinances from the time of the program’s inception through January 2013. The extension of HARP reinforces the web portal’s relevance by extending the program for an additional two years. The FHFA plans on launching a nationwide campaign to inform homeowners about HARP and motivate them to explore and utilize the program. HARP already allows borrowers to refinance underwater loans held by Fannie Mae and Freddie Mac, but a bill introduced earlier this year, the Responsible Homeowner Refinancing Act of 2013, would expand HARP to include all Fannie Mae and Freddie Mac loans, whether underwater or not, and result in as many as 13 million more eligible borrowers

****Cognizant of a mortgage refinance industry in flux, Xetus created the Subordination Management Platform to adjust to various types of incoming subordination requests. The application treats each request uniquely, depending on whether a request is for a VA, FHA, HARP, or other loan. Automatic adjustments also allow the application to handle fees differently, such as applying a fee to a LOC or deducting it from the borrower’s checking account, depending on preference or regulatory compliance. The state of Texas, for instance, does not permit financial institutions to charge borrowers for subordination requests. In cases in which a request cannot be automatically recommended for approval or declined based on specified calculations, the platform marks and delivers the request for an underwriter’s consideration and decision. The XetusOne platform also allows for counter-offers—such as approval with a reduction in the line amount—providing a means for lenders to remove risk from their second lien portfolios during this period of turbulence and uncertainty in the housing market.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Why We Need HARP 3.0

*Why We Need HARP 3.0*
**By George Yacik**

NEW-GeorgeY***Dear President Obama and Members of Congress: Please set aside your political differences for a little while and pass legislation to enact HARP 3.0. Soon.

****There are still millions of homeowners who are current on their mortgages and underwater on their loans but have been unable to take advantage of the first two versions of the Home Affordable Refinance Program and refinance into a low rate mortgage.

****They had the misfortune of getting their current mortgage from a lender who didn’t sell it to Fannie Mae or Freddie Mac, and now they’re stuck with it. Or they’re ineligible for some other reason, sometimes trivial. Like me.

****Full disclosure: This column is at least partially self-serving. I got my current mortgage loan when I bought my home in late 2006 from a large thrift that later went bust. A large commercial bank subsequently bought its servicing portfolio.

****The loan is owned by one of the GSEs – or at least my servicer tells me it is. Both of the GSEs say they don’t own the loan.  (If that’s the case, where has my servicer been sending all that money to the past seven years? That’s a subject for another column).

****I can’t refinance through HARP 2.0 now because apparently I had “refinanced” back in early 2007 when my wife and I sold another home and used the proceeds to buy down the interest rate by a half percentage point.

****I didn’t know it at the time, but that minor technicality is now preventing me from taking advantage of HARP 2.0. I’m stuck with an interest rate that is at least two full percentage points over current market rates.

****I can’t do a conventional refi because I’m underwater on my home. Even if I could find a lender willing to do a 100% LTV loan, I’d have to pay mortgage insurance, which would wipe out any savings by doing the refi.

****Did I mention I’ve never missed or been late with a payment in my life?

****I don’t know how common my situation is, but I do know that there are millions of people who can’t take advantage of HARP now because they got their current loan from a subprime or Alt-A lender, not one that either Fannie or Freddie bought.

****At least 20% of mortgages, if not a lot more, that were originated in the pre-bubble years are not owned by Fannie or Freddie, one lender told me.

****Of course, the biggest objection to a HARP 3.0, unlike the previous two versions, is that it means shifting the risk on these loans from the private sector to the GSEs – i.e., the taxpayers.

****But how risky are these people to begin with? If they’ve managed to pay their above-market-rate mortgage for the past several years of a lousy economy and record unemployment and never been late, the additional risk to the government agencies will be minimal.

****If these people can refinance into a loan that can save them several hundreds of dollars a month, they’ll be even less likely to default.

****Any additional risk, if there is any, will be more than compensated for by the extra money flowing into the economy as these people get the equivalent of a big tax refund.

****It’s also an issue of fairness. Why are we being prevented from taking advantage of a government program open to other financially responsible homeowners just because of a minor technicality or because we got a loan years ago from a lender now in disrepute?

****It’s nice that the Federal Reserve has lowered interest rates to record low levels, enabling millions of homeowners to refinance at rates so low they’ll likely never refi again. But it can’t force lenders – or Fannie and Freddie – to change their underwriting guidelines.

****But HARP 3.0 would, and it won’t cost the government a dime.

****Passing HARP 3.0 would also give a much needed boost to a mortgage industry desperate for new loan volume. One lender told me he could double the number of HARP refis he does now if the program were opened up to people whose loans aren’t owned by Fannie or Freddie.

****With refis expected to tail off sharply over the next several years, HARP 3.0 would help keep the refi “boomlet” running at least a little longer, providing additional stimulus to an economy and an industry still in need of some.

George Yacik has been a financial writer for more than 30 years. After working 12 years at The Bond Buyer and American Banker as a reporter and editor, he joined SMR Research Corp. as a vice president, where he was the lead research analyst and project leader for SMR's studies on residential mortgages and home equity lending. Since 2008 he has been writing for a variety of mortgage-related and financial publications. George is based in Stratford, CT, and can be reached at gyacik@yahoo.com.

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.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Understanding The News: Painting A Very Clear Picture Of HARP II

*Painting A Very Clear Picture About HARP*
**Webinar Looks to Educate All**

***Will HARP II be the thing that restarts the mortgage industry? Probably not. However, HARP II does present a set of opportunities for lenders to help borrowers. So, what’s HARP II really all about? There’s a lot of misinformation out there so AllRegs will offer a training webinar entitled, “The HARP II Program,” Tuesday, May 22, 2012, from 2:00 p.m. to 3:30 p.m. Eastern Time. Registration is $265 per site, to educate the space. Here’s the details:

****The Home Affordable Refinance Program (HARP) was originally introduced as a part of the Making Home Affordable Program in March, 2009. The program had two outstanding advantages – it afforded someone who had worked hard to stay current the ability to refinance, and they were allowed to refinance their outstanding principal balance despite the fact that their property value may have be significantly “underwater” based on the fair market value. Servicers were still concerned about using the program as many of the people had loan-to-value ratios that far exceeded the 105% limit. The limit was raised to 125%, then to 140% of fair market value.

****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, AllRegs 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. AllRegs Academy instructors Elana Lovoy and Pat Taylor will provide ideas on how to communicate this program to potential borrowers, analyze the risk and determine best practices for originating this type of loan program.

****Production and Servicing Managers, Risk Officers, Asset and Portfolio Managers, and any staff members responsible for early intervention of loans that may be at risk of default are encouraged to attend.

****The cost for this course is $265 per site, with the ability to dial in to the conference from one phone line at each site. To learn more or register, click here or visit www.allregs.com.

Progress In Lending
The Place For Thought Leaders And Visionaries

Understanding The News: HARP Is For Everyone

*HARP 2.0 Is For Everyone*
**Help For Smaller Banks**

***PROGRESS in Lending has learned that String Real Estate Information Services, a consultancy and back-office service provider to the U.S. home finance industry, has added capacity in preparation to help smaller mortgage lenders capitalize on the government’s recently announced Home Affordable Refinance Program (HARP 2). As many as 6 million homeowners may qualify to refinance existing mortgages under the program but experts say smaller institutions could benefit the most. Here’s the whole story:

****Research performed recently by FBR Capital Markets analysts predicts that the biggest beneficiaries of the HARP 2 program are likely to be smaller originators, if they are well positioned to pick up market share. Unfortunately, these smaller firms are the ones that are likely to need the most support to take on this additional volume.

****“Helping these originators find qualified borrowers, contact them with offers, underwrite and process their applications are exactly the types of tasks that our team has been built to handle easily,” said Prashant Kothari, chief executive officer for String Real Estate Information Services.”

****String has enjoyed phenomenal growth over the past 2 years and has been expanding into new markets and extending its footprint within the U.S. real estate industry. The company has been particularly successful in building capacity for title industry outsourcing. Kothari said String identified the HARP 2 opportunity last fall and has been working to build capacity since then. The company is taking on new clients for HARP 2 services now.

Progress In Lending
The Place For Thought Leaders And Visionaries

Video Insights: Helping Servicers Succeed

*Helping Servicers Succeed*

***How do we handle the tidal wave of defaults? There are many ideas out there. The fact is that the mortgage crisis has brought additional responsibilities to both Lenders and Servicers. At ENGAGE 2011, hosted by PROGRESS in Lending Association, executives gathered to discuss this topic. Here’s what they said:
httpv://www.youtube.com/watch?v=tRTEY5o6ZEs

Progress In Lending
The Place For Thought Leaders And Visionaries