Mortgages with loan-to-value ratios of 95% and above in May experienced a refinancing spike, suggesting the Home Affordable Refinancing Program is gaining traction, according to the latest Ellie Mae mortgage origination report.
In May, the average LTV for closed loans broke the 80% mark for the first time since the Pleasanton, Calif.-based mortgage technology firm’s tracking began in August 2011.
“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),” said Jonathan Corr, chief operating officer of Ellie Mae. “Closed conventional refinances with LTVs of 95%-plus jumped to 11%, in May, up from 7.1% in April and 3.6% in March, which may be a sign that HARP 2.0 is helping more borrowers.”
Reflecting the spring home-selling season, the percentage of purchase loans rose to 46% in May, their highest level of 2012, Ellie Mae reported. Loans closed in 46 days on average, one day longer than in April, and refinances took 48 days to close, also one day longer than the previous month”
“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,” Corr said.
That growing perception might soon get stunted, as Fannie Mae’s economic research team said "risks to the economic outlook have titled to the downside." On Tuesday, it projected home prices won’t reach bottom until 2013 and that the nation’s gross domestic product will grow just 2.2% in 2012.
Additionally, the volume of mortgage applications filed remained virtually unchanged for the week ending June 15, with the number of filings edging up a slight 0.8% from a week earlier, according to the Mortgage Bankers Association.
The MBA reported that refinance volume increased again last week, but the composition of activity changed markedly.
"Despite rates remaining near all-time lows, conventional refinance application volume declined, and the HARP share of refinance activity dropped to 20%,” said Michael Fratantoni, MBA vice president of research and economics.
The number of refinanced Fannie Mae and Freddie Mac mortgages nearly doubled in the first quarter as the largest banks launched the new version of HARP.
Ellie Mae also found that credit scores for closed loans decreased slightly to 744 in May, with the biggest drop in Federal Housing Administration refinances, where the average credit score declined to 713 in May from April’s average of 720.
Click on image below for Ellie Mae's May findings:
In 2011, about 2 million loan applications ran through Ellie Mae’s mortgage management software, or 20% of all mortgage originations. The company’s report mines its data from a sampling of about 33% of all mortgage applications that were initiated on its origination platform.