In the months immediately after the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure rule, the time to close a mortgage loan rose as the industry worked through the new and complex process of disseminating loan information to borrowers.
Since then, closing times fell, but now they’re on the way back up, which begs the question: Is this the start of a trend? Or is this just the new normal?
Early on, the average time to close rose from 46 days in October 2015 when TRID took effect, to as high as 50 days in January of this year. But that trend reversed itself in February, and especially in March, when the time to close fell back to a 12-month low of 44 days.
That figure held steady in April, but a potentially troubling trend emerged as spring turned to summer.
According to Ellie Mae’s Origination Insight Report, which is pulled from a “robust” sampling of approximately 75% of all mortgage applications that were initiated on Ellie’ Mae’s Encompass system, the time to close is moving back up.
Per Ellie Mae’s report, in May, the time to close rose from 44 days to 45 days. June saw another increase, as the time close a loan rose to 46 days.
Ellie Mae’s most recent Origination Insight Report, published last week, showed that the time to close held steady at 46 days in July.
While the increase for all loans is only two days, the rise in the time to close a refinance loan is significantly larger.
According to Ellie Mae’s report, the time to close a refinance loan fell to as low as 41 days in March, after reaching as high as 52 days last year pre-TRID and 48 days in January of this year, post-TRID.
But since falling to 41 days in March, the time to close a refinance loan has risen by a full week, checking in at 48 days in July.
Conversely, the time to close a purchase loan has fluctuated even less since the lows of March, when the time to close hit 45 days. Since then, the time to close has only risen by one day, hitting 46 days in June and July.
It should be noted that the time close in July 2016 is actually lower than the time to close during the same time period last year. In July 2015, the time to close on all loans was 48 days compared to 46 days this year, while the time to close on refinance loans was 52 days last year versus 48 days this year. The time to close a purchase loan is actually up slightly, climbing from 45 days last year to 46 days this year.
So is this year’s increase in days to close just the industry fully settling into the post-TRID world and finally finding some semblance of normalcy, or is it more concerning than that? Only time will tell.
Additionally, Ellie Mae’s latest report also showed several interesting trends.
According to Ellie Mae’s report, the closing rate for all loans, which is the percentage of loan applications in the previous 90-day cycle that closed during a given month, rose to the highest level since at least March of last year.
Per Ellie Mae’s report, the closing rate for all loans was 71.6% in the month of July, rising from 69.6% in June and 70.6% in May.
The closing rate on purchase loans was 75.7% in July, while the closing rate for refinances was 66.6%. July’s closing rate on purchase loans was the highest since at least March 2015, while the refinance closing rate was just below the recent high of 67.2% in May.
Interestingly, as the closing rate has risen, the average FICO score has risen as well, suggesting that the increased closing rate is not a function of an expanded credit box.
According to Ellie Mae’s report, the average FICO score for closed loans in July was 727, the highest since June of last year. In fact, the average FICO score for closed loans has risen throughout 2016, beginning the year at 719 and rising in each subsequent month to July’s high of 727.
Also of note in Ellie Mae’s report is the fact that the average interest rate for all 30-year mortgages closed in July was the lowest in more than a year, falling below 4% to 3.87%, which is lowest since at least March 2015.
