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Refinance Share of Mortgages Rises for Fourth Straight Month


In a surprising turn of events, refinancing is finishing the year unexpectedly strong, per the latest Origination Insight Report from Ellie Mae.

The company revealed that refinances accounted for 45% of mortgage lenders’ loan volume in November, up from 40% in October. It was the fourth consecutive monthly increase and matches the share seen exactly one year earlier.

Additionally, volume has risen 13% from the dismal 32% share seen in July when refinance activity seemed to be sputtering out.

Despite recent improvement, the refinance share was as high as 47% in January of this year and averaged 53% in 2013. Whether it will climb back to those levels remains to be seen.

The refinance share for FHA loans inched up to 17% from 16% a month earlier but remains abysmal because conventional loans are just a better deal nowadays for most individuals.

The refinance share for conventional loans increased to 56% from 49% last month, and is now at its highest point since January.

Amazingly, the refinance market seems to keep finding more life just when it seems everyone has already refinanced.

You can attribute that to the low interest rates that won’t seem to go away, despite forecast after forecast calling for rates north of 5%. Look for those to be revised once more.

And if rates dip even lower, as they have been recently, we could even see a new mini or major refinance boom in 2015. Just look for oil to keep plummeting and you could snag a new low interest rate.

This is especially helpful at a traditionally slow time of year for purchases, giving lenders something to be cheery about over the holidays.

Refis Are Also Closing Faster

refi share

Lenders are also doing a better job of closing refinance applications. The average time to close a refi dipped from 39 days in October to 37 days in November, the shortest length of time reported all year.

Of course, this probably means overall refinance volume is down sharply from previous levels. It also means purchase activity isn’t too hot, whether due to a lack of supply or a lack of interest from prospective buyers. It could also be seasonal.

Speaking of, the purchase share of home loans fell to 54% last month, down from 60% in October. It’s now well off the 67% share seen in July, but remains above the 47% share seen in 2013.

Purchases are taking a little longer to close nowadays, with average length of time to close rising from 40 days in October to 41 days in November.

However, the closing rate on purchases increased to 66.5% last month, the highest level since Ellie Mae began tracking back in 2011. It averaged 60.1% last year.

The takeaway is that lenders seem to be doing a better job closing the applications they bring in. Still, I’m sure they’d trade that for more business in a heartbeat.

Ellie Mae also reported that the adjustable-rate mortgage share of closed loans dipped to 6.1% in November from 6.3% in October. It was as high as 7.6% this year, but remains well above the 4.2% average seen in 2013.

Meanwhile, the 15-year fixed share of funded loans increased to 10.3% last month, up from 9.6% a month earlier. It has been as low as 8.9% and as high as 15% this year.

So it turns out 2014 hasn’t been as bad as many predicted, and the way things are going, 2015 might be pretty decent too.

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