In April lenders loosened up slightly on the loan-to-value ratio used to make approval decisions on mortgage refinance applications. However, but the lid is still screwed down tightly on purchase mortgages used to buy homes, according to the Ellie Mae Origination Insight Report.
"In April, the average loan-to-value (LTV) for closed loans hit 80 percent, the highest we have seen since we started tracking in August 2011. The increase was driven by an easing of LTVs on conventional refinances (the average LTV was 69 percent in April compared with 65 percent in March) and what we believe to be the first surge in Home Affordable Refinance Program (HARP) 2.0 activity from correspondent lenders," said Jonathan Corr, chief operating officer of Ellie Mae.
LTVs on purchase loans were steady, highest for FHA loans at 95 percent. LTV ratios for conventional purchase loans stayed at 81 percent, virtually unchanged for at least nine months.
"Last month closed refinances with LTVs of 95 percent-plus, nearly doubled to 7.1 percent compared to 3.6 percent in March. 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."
Ellie Mae, which processes approximately two million loan applications, or 20 percent of all U.S. mortgage originations, reported a slightly higher closing rate for all loans of 48.1 percent over 46.9 percent in March.
Lenders took a little longer to process applications in April. "Recently, the Wall Street Journal and other media outlets have been reporting that the nation's largest retail lenders are now quoting long timelines for refinances—in some cases as long as 60 to 90 days," said Corr. "While the average refinance going through our platform took five days longer in April than in March, it still only took 47 days. So, it appears that small and mid-sized lenders and community banks on our platform are providing faster decisions than the retail channels of some mega-lenders."