Ellie Mae: Refis dominate end-of-year mortgage market

Buyers rush to refinance before tax reform takes effect

Refinance mortgages dominated the mortgage market in December due in part to purchases being down in the winter months, and also borrowers rushing to close their loans before the newly instated tax reform took effect.

The percentage of refinances rose to 40% of all closed loans in December, up 1% from the previous month, according to the latest Origination Insight Report from Ellie Mae.

The company explained that the reason for this increase in December can be attributed to several factors.

“As we closed out 2017 we saw an increase in the percentage of refinances due to seasonality as fewer purchases take place in the fourth quarter, and likely homebuyers were taking advantage of the mortgage deductibility limit before it decreased to $750,000 on December 15th,” said Jonathan Corr, Ellie Mae president and CEO.

“We probably can also attribute some of the increase in closing rates to last-minute efforts by borrowers to close loans before the tax changes took effect,” Corr said.

The percentage of FHA refinances increased to 25% of closed loans, up one percentages point from the month before, and conventional refinances increased to 47% of closed loans, up from 45% in November.

The closing rate in December also increased across all loan types from 70.9% to 71.2%. Closing rates on refinances increased from 65.1% to 65.6% while closing rates on purchases increased from 75.5% to 76.1%.

Closing times increased slightly in December, inching up one day to an average 44 days, the report showed.

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