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Refi Share Makes Comeback in January

priceThe refinance share of the mortgage market experienced sharp growth in January as interest rates declined to their lowest level in a year and a half, Ellie Mae said Wednesday.

Based on a sample of loans originated on the company's platform, Ellie Mae reported that refinances accounted for 51 percent of loan volume in January, a jump of 8 percentage points from December. The spike put refinance share at its highest in more than a year and a half.

Jonathan Corr, Ellie Mae's CEO, said the resurgence reflects activity from borrowers who may have been unable to take advantage of 2013's rock-bottom rates to lower their mortgage payments. The average interest rate for a 30-year fixed-rate mortgage was 4.15 percent in January, according to Ellie Mae, the lowest since July 2013.

"Homeowners who missed refinancing over the past year because they did not have enough equity in their homes are getting a second chance in 2015," Corr said.

Despite the jump in refinance share, the average closing time for refinances fell to 39 days from 42 in December, matching the 2014 average. The time it took to close a purchase loan fell to 40 days, down from 42 in December and the 2014 average of 41.

The closing rate for both purchase loans and refinances rose more than 2 percentage points to start the year, climbing to a survey high of 62.4 percent. The refinance closing rate was up dramatically over December, rising more than 5 percentage points to 56.5 percent, while the purchase closing rate ticked up modestly to 68.3 percent.

Meanwhile, as lenders report easing up on credit standards, a look at loans closed in January shows average credit scores and loan-to-value (LTV) ratios tightened slightly. The average FICO for closed loans last month was 731, up from 728 in December, while the average LTV was down 1 point to 79 percent. About 30 percent of closed loans had a FICO score below 700, down from 32 percent in December.

Among denied applications, the average FICO was 681, up slightly from a month prior. The average LTV remained flat at 80 percent.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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