The Spring homebuying reports are in, and there are some very positive signs for lenders. And, based on this recent news from the Fed, things are likely to get even better soon.
According to the most recent Origination Insight Report from Ellie Mae, more of the loan applications lenders are taking are making it all the way to the closing table. According to the report, the closing rate hit its highest level since Ellie began publishing the report in 2012, rising to 75.6%. It increased from 70.2% year-over-year and 74.8% from April.
The report analyzed data from approximately 80% of the applications lenders took through Ellie’s Encompass platform over the past 90 days.
Part of the reason for the robust activity may be that borrowers are pleased with the low interest rates. The average 30-year note rate dropped to 4.52% in May from 4.84% the year before and from 4.61% in April, according to National Mortgage News. That’s the fifth consecutive month-over-month decline.
Improving pull-through, the measure of closed loans to total loan applications taken, is the objective of every lender in reducing overall origination costs. According to MBA surveys, loan production expenses have been rising steadily. Expenses like compensation, occupancy, technology and office equipment are already spent by the time the loan application is taken. If those loans don’t close, it’s money wasted.
For lenders closing loans electronically, they are seeing a reduction in their origination costs. For a lender originating 12,000 mortgages per year with an average loan value of $250,000, transitioning to a hybrid eClose approach results in $155 in savings per loan, which adds up to a whopping $1.8M in savings annually.
Finally and best of all, the recent Fed rate cut, the first since December 2008, could refuel refinance transactions, which are perfect for eClose. According to the MBA’s Senior Vice President and Chief Economist Mike Fratantoni, the Committee voted to cut their target rate by 25 basis points in an effort to insure against a further slowdown in the economy.
Docutech makes it easy for lenders to utilize an eClosing workflow. In partnership with Simplifile, the platform provides a comprehensive eClosing solution, complete with eSigning efficiencies from the initial document generation all the way through post-closing. Docutech’s Solex eClosing platform is also approved by both Freddie Mac and Fannie Mae for eClosing, eNote and eVault functionality.
To see how much you can save with eClosing, run our Solex eClosing cost savings and ROI calculator here and schedule a complete product demo today.