Mortgage approval rates have risen nearly 20 percent over the past 12 months yet there is virtually no evidence that lenders are relaxing underwriting standards, according to the February originations report from Ellie Mae.
In February some 56.8 percent of all mortgage applications, both purchase mortgages and refinancings, were approved by lenders using Ellie Mae’s Encompass360 software, which handles about 20 percent of all U.S. mortgage originations. That’s an increase of 18.6 percent from the 47.9 percent approved a year ago. Approval rates have risen quickly in recent months. For 2012, the average closing rate for all mortgages was only 49 percent, 15.9 percent below the February closing rate.
Home buyers taking out a purchase mortgage to buy a home have been more successful than homeowners seeking to refinance. Some 61.7 percent of home buyers were approved for a mortgage in February compared to 54.7 percent of refinancing homeowners.
The data show almost only a slight decline in only one of the three key factors lenders use for mortgage approvals: FICO scores, loan to value ratios and debt to income ratios. Loan to value ratios have risen to 80 today compared to 76 a year ago, an increase of 5.2 percent but median FICO scores for all approved loans are less than one percent lower than they were a year ago, down from 750 to 745. Debt to income ratios are exactly the same as a year ago: 23 percent and 35 percent when mortgage payments are included.
Despite the improved percentage of approvals, mortgages are taking a little longer to process than a year ago. Purchase loans took 47 days to close in February, slightly longer than the 45 days it took a year ago. Refinancings are taking significantly longer today than a year ago, 50 days compared to 44 days.