Mortgage closing times hold steady, despite growing purchase market shift
As purchase mortgages continue to dominate overall industry volume, lenders aren't letting the extra work required to close these loans affect their productivity.
Purchase transactions accounted for 71% of loans closed in June, Ellie Mae said, up from 68% a year ago and 70% in May. The purchase share marks a record high going back to 2011, when the software vendor began its monthly report of lending activity. The data is based on a sample of loans originated by lenders that use Ellie Mae's loan origination system.
However, closing times for purchase loans remained fairly steady at 44 days, only one day more than the 43-day average in both last year and May. And the average time to close across all loan types held steady at 46 days compared to last year, but was one day higher from a month ago.
"While inventories remain tight and interest rates are on the rise, we are still seeing a very robust purchase market with 71% of all loans representing home purchases and closing rates at 75% on purchase loans," Jonathan Corr, president and CEO of Ellie Mae, said in a press release.
With more of lenders' volume coming from purchase transactions, it would not be unusual for closing times to increase. But the relatively consistent closing times are likely the result of a number of factors, chief among them is the overall decline in the number of loans being originated.
Ellie Mae does not provide volume-related metrics in its report, but origination volume in the first half of 2018 was 5.6% lower than the first half of 2017, according to the latest Fannie Mae estimates. And the government-sponsored enterprise cut its full-year 2018 forecast for the third time this year.
Another factor influencing closing rates is increased efficiency from lenders' investments in consumer self-service technology and other digital mortgage innovations.
Refinance volume is waning as rising mortgage rates gave fewer borrowers an incentive to get a new loan. Refi volume was 19% for Federal Housing Administration, unchanged from a year ago, and 31% for conventional loans, down from 37% last year, Ellie Mae said.
The share of Department of Veterans Affairs loan refinances was 23% in June, compared to 25% in both last year and in May. VA refinance volume has been in flux lately due to ongoing policy changes to curtail so-called refi churn.