Insights by Insights: Falling into seasonal trends with healthy closed loans

Ellie Mae’s September 2020 Ellie Mae Insights™ data shows that loan applications have trended down, following the typical Fall seasonality, but volumes remain historically high. Closed loans are very healthy as the loan application backlog from the previous quarter is being processed. 

If you are an Ellie Mae Insights customer, we have embedded links below to each Insights chart so you can follow along and map your own data against what we are seeing for the industry.

Loan applications as the leading indicator

Overall loan applications for September are down 9.7% from August, compared to an approximate 6% decrease from July to August. Looking at seasonality for the September over August period in 2019, 2018, and 2017, loan applications were down 17.1%, down 17%, and down 15.6% respectively. 

Figure_1.png

View chart in Ellie Mae Insights.

The below bar chart provides context to the September over August dip. We can see the September 2020 loan application volume (>65% increase in overall volume compared to September 2019) is still near highs for the three-year plus period we are showing. If you take out the March 2020 spike, we see September is following a pattern typical for the Fall, albeit at a much higher volume.

Figure_2.png

September over August 2020 purchase applications dipped 8.4% following a slide of 6.4% for August over July. Taking seasonality into account for the September over August period in 2019, 2018, and 2017, purchase applications were down 10%, down 18.4%, and down 18.7% respectively.

Figure_3.pngView chart in Ellie Mae Insights.

September over August 2020 refinance loan applications dipped 10.4% compared to August over July’s decrease of 6%. Seasonally in 2019, 2018, and 2017 for September over August, refinance loan applications were down 22%, down 14.7%, and down 12.3% respectively.Figure_4.png

View chart in Ellie Mae Insights.

Geographically for September over August, Iowa was the only state with increasing loan applications. The most recent borrower profile (right hand side of the below chart) remains strong, with a slight drop in credit score, a decrease to DTI and a slight increase to LTV. Interest rates increased 2bps, while the average customer age held steady at 46 years of age.

Figure_5.JPG

View chart in Ellie Mae Insights.

Furthermore, viewing by MSAs, we see clearly many areas (identified in blue below) across multiple states in the US had increases in loan application volume.

Figure_6.pngView chart in Ellie Mae Insights.

Closed loans are extremely healthy

Overall closed loans are still working off historical loan application volumes. September over August closed loans increased 9.4%. Seasonally, September over August for 2019, 2018, 2017 were up 0.6%, down 20.2%, down 8.6% respectively.

Figure_7.png

View chart in Ellie Mae Insights.

The below bar chart provides context to the September over August increase in overall closed loans. We can see the September 2020 closed loan volume (>80% increase in overall volume compared to September 2019) is at an all-time high for the three-year plus period we are showing. 

Figure_8.png

September over August purchase closed loan volume increased 4.2%. Seasonally, September over August for 2019, 2018, 2017 were down 13.5%, down 21.4%, down 12.5% respectively.

Figure_9.png

View chart in Ellie Mae Insights.

September over August refinance closed loan volume increased 13.2%. Seasonally, September over August for 2019, 2018, 2017 were up 20%, down 16.1%, down 0.6% respectively.

Figure_10.png

View chart in Ellie Mae Insights.

With moderation of activity, an opportunity…

Thus far in 2020, we have seen an unprecedented run in loan applications and lenders continue to work off the historically high volumes of applications. Closed loans remain extraordinarily high while loan application volume begins to normalize. Now is the time for lenders to do two things:

  1. Use Ellie Mae Insights to explore specific MSAs and counties that have loan application growth.
  2. Build your data and analytics capabilities for the next cycle, so you don’t get left behind.

What data would you like to see in future Insights by Insights blogs? Let us know by leaving a comment or email us at insights@elliemae.com. Join us on November 5 as we host our first Insightful Coffee Break where we will dive into the data further and discuss all things data and analytics.

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