Insights by Insights: Staying the course with pockets of higher margin

Before diving into this month’s data, the team is excited to announce enhancements to Ellie Mae Insights™. Lenders using Insights will notice a refreshed look and feel, as well as additional capabilities including: 

  • Geographical breakdowns of your and your peer groups data  
  • Interest rate and APR data for both good faith estimate (GFE) loan applications and closed loans 
  • New tablet experience 

The July 2020 data shows the market is charting a steady course for both loan applications and closed loans. If you look at the industry's APR data geographically and in a more granular manner, you can see pockets across the country where lenders can realize higher margins. 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 July was up nearly 6% from June, compared to an approximate 19% increase from May to June. We could state that the purchase market cooled down in July, however, we need to also take seasonality into account. When reviewing the July over June period over the past several years, we saw loan applications were up 5.8% in 2019, down 1.8% in 2018, and down 8.7% in 2017. Anecdotally, lenders are sharing that August has been shaping up to be an extremely busy month. We’re also monitoring the impact of the recent announcement by Fannie Mae and Freddie Mac to raise fees by 50 bps for lenders on all mortgage refinances starting September 1, 2020. 

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View chart in Ellie Mae Insights.

July over June 2020 purchase applications dipped 4.7% after a scorching 28%+ increase for June over May. In context, the dip is coming from a historically high purchase loan volume.  

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View chart in Ellie Mae Insights.

Conversely, July over June 2020 refinance loan applications continued to climb with an increase of ~12% compared to the nearly 14% increase for June over May. 

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View chart in Ellie Mae Insights.

Geographically, loan applications for Western and Eastern states were healthy, while there was some weakness in the middle of the country. The most recent borrower profile (seen in the right-hand side of the below chart) is very strong, showing an increase in credit score and decreases to DTI and LTV. Interest rates continue to drop and while first time home buyers have decreased, we are seeing the resurgence of a stronger refinance market over the last month. 

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View chart in Ellie Mae Insights.

With the exception of a few states, such as California and New York, the majority of the U.S. saw a decline in purchase loan applications.  

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View chart in Ellie Mae Insights.

Refinance loan applications are extremely strong (as seen below) across the entire country, driven by historically low interest rates. You can also see the high-quality profile of the average borrower. 

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View chart in Ellie Mae Insights.

Where can I capitalize on margin? 

Since its peak in November 2018, APRs have been trending downwards. Hence, it would come as no surprise that every state is showing decreasing APRs for July over June.  

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View chart in Ellie Mae Insights.

As we look at the July vs. June data and drill into each state for a micro view, we can see many opportunities to improve lender margins. The view below is drilling into real-time data for Florida broken out by county. The blue color indicates counties that are actually increasing their APRs. An enterprising lender making loans in those counties can take advantage of these trends. 

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View chart in Ellie Mae Insights.

And below is a more granular view by zip code. If desired, we can also break down the view by MSA. 

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View chart in Ellie Mae Insights.

Look for margin expansion opportunities 

The market is charting a steady course with respect to both purchase and refinance loan applications. As lenders continue to work off the historically high volumes of loan applications, there’s also an opportunity for smart lenders to capitalize on regions in this country that are enjoying a slightly higher APR.      

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. We are just scratching the surface of Ellie Mae Insights, click here if you would like to learn more about its broad range of capabilities.

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