Market tilts toward purchase loansby Marcie Geffner
After years of a refinance boom in which homeowners replaced their existing home loans with new ones at lower mortgage rates, the mortgage market today has tilted substantially away from refinancing to purchase loans for homebuyers.
The latest evidence was a recent report released by Ellie Mae, which provides technology systems for residential mortgage companies.
The report analyzed a sampling of loan applications that flowed through Ellie Mae’s mortgage management software and network.
The report found 60 percent of the closed loans in March 2014 were to purchase a home. A year earlier, purchase loans made up only 38 percent of the total, a dramatic change.
In a statement, Ellie Mae President Jonathan Corr said, “We continue to see the resurgence of a purchase-centric market as numbers inch closer to historical levels.”
FICO scores tick up
Corr also said the requirements for borrowers to obtain a loan “tightened ever so slightly” in March.
“The average FICO score on all closed loans increased for the first time in 2014, rising one point to 725. The average debt-to-income ratio also tightened.” Corr said.
Purchase-money loans closed in 41 days, on average, in March, six days faster than January, according to Ellie Mae’s report.
New construction to add supply
Separately, Fannie Mae downgraded its 2014 housing forecast due to “a lackluster sales picture.”
In a statement, Fannie Mae Chief Economist Doug Duncan said the loss of momentum likely would prove temporary due to an increase in new-home construction.
“While existing home sales have remained essentially flat,” Duncan said, “we continue to believe that new home sales will increase at a double-digit pace. Housing starts are expected to rise to about 1.05 million units in 2014, up from 925,000 in 2013.”
Fannie Mae expects housing to add 0.3 percentage points to U.S. economic growth this year. The full-year forecast anticipates economic growth of 2.7 percent, only slightly ahead of 2013’s 2.6 percent pace.