Credit Scores on Closed Loans Continue to Drop According to Latest Origination Insight Report

Underwriting at loosest level in 2015 with debt-to-income ratios at 25/39

PLEASANTON, Calif. – November 18, 2015 – Credit scores on closed loans continued to fall to their lowest levels since Ellie Mae began reporting data in August 2011, according to the latest _Origination Insight Report_ released by Ellie Mae® (NYSE:ELLI), a leading provider of innovative on-demand software solutions and services for the residential mortgage industry. The average FICO score on all closed loans fell to 722, marking the fifth consecutive month of decline. Additionally, the average FHA refinance FICO score fell 7 points to 654 while the average VA purchase loan FICO score declined to 705, its lowest point since April.

Ellie Mae’s data also shows that the front-end and back-end debt-to-income (DTI) ratios have loosened materially to 25/39, the highest percentages since January 2014. Additionally, closing rates remained robust with over 66 percent of all loan applications closing for the fourth consecutive month. The closing rate on purchase loans remained steady at 71 percent.

“It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect just last month,” said Jonathan Corr, president and CEO of Ellie Mae. “The time to close loans remained a constant 46 days for yet another month, while the closing rate on purchased loans has stayed above 70 percent. We may begin to see time to close increase in the November data as the new closing disclosures are utilized for the first time.”

The Origination Insight Report mines its application data from a robust sampling of approximately 66 percent of all mortgage applications that were initiated on the Encompass® all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

Other findings from the October report:

  • The average 30-year rate for all loans declined for the second consecutive month, falling to 4.246.
  • The time to close on all loans remained steady at 46 days.

Back arrow