Insights by Insights: Volumes remain high with quality borrowers

The Ellie Mae Insights data from August 2020 shows the market dipped slightly from the record-breaking volume of loan applications that we've seen in recent months. However, an examination of the demographic data shows that the quality of borrowers continues to be high. 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 August are down nearly 5% from July, compared to an approximate 6% increase from June to July. Looking at seasonality for the August over July period in 2019, 2018, and 2017, loan applications were up 16.7%, down 2.7%, and down 16.7% respectively. 

September Insights by Insights Blog: Chart 1

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The below bar chart provides context to the August over July dip. We can see the August 2020 loan application volume (which shows an increase of more than 50% in overall volume when compared to August 2019) is still near the highest points we've seen in this 3-year plus period.

September Insights by Insights Blog: Chart 2

August over July 2020 purchase applications dipped 6.4% following a slide of 3.2% in July over June. Taking seasonality into account for the August over July period in 2019, 2018, and 2017, purchase applications were down 6.7%, down 1.4%, and up 9.1% respectively.

Figure_3.png

View in Ellie Mae Insights.

August over July 2020 refinance loan applications dipped ~4% compared to July over June’s increase of nearly 12%. Seasonally in 2019, 2018, and 2017 for August over July, refinance loan applications were up 41%, up 10.6%, and up 26.4% respectively.

September Insights by Insights Blog: Chart 4

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Looking at refinance loan applications on a weekly basis from July to August, we see week-over-week modulations during this time period. For the month of August, we see the first week of August was up 6.2% week-over-week, but there was a decline for the rest of August. Perhaps this was due to the FHFA announcement approving Fannie and Freddie’s request for a 50bps increase in fees for refinance loans. The FHFA later pushed out the implementation of the fee increase to December 2020, which may account for a smaller percentage decrease in loan applications in the last week of August.

September Insights by Insights Blog: Chart 5

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Interestingly, looking at interest rates for the same time period and the same weekly view, we see the weekly changes are inverted to the refinance loan applications view for August.

September Insights by Insights Blog: Chart 6

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Geographically for August over July, Utah, North Dakota, and New York states had increasing loan applications. The most recent borrower profile (on the right hand side of the below chart) remains strong, with no change in credit score or decreases to DTI and LTV. Interest rates dropped slightly while the average customer age held steady at 46 years of age.

September Insights by Insights Blog: Chart 7

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

September Insights by Insights Blog: Chart 8

View in Ellie Mae Insights.

Refinancing demographics

Looking at the refinance loan applications demographic for August over July 2020 compared to the same time period in 2019, we see a shift in multiple categories:

  • Refinance loan applications for this 2020 time period were ~64% of all loan applications; in 2019 they were only ~55%
  • Conventional loans in the same 2020 time period were ~80% of all loan applications; where in 2019 they were ~65%
  • As expected, the average refinance interest rate for the 2020 time period was 2.95%, down from 3.88% for the same time period in 2019
  • The average credit score in the same 2020 time period was 752 compared to 730 in the same period for 2019 
  • 55% of refinance loan applications in August 2020 had a credit score of 760 or higher (see the left hand panels below) compared to 37% in 2019

August 2020 refinancing demographicsSeptember Insights by Insights Blog: Chart 9

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August 2019 refinancing demographics

September Insights by Insights Blog: Chart 10

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Slight cooling, but quality borrowers abound

2020 has seen an unprecedented run in loan applications and lenders continue to work off the historically high volumes of loan applications. As August brought a slight slowdown to the number of loan applications compared to the previous months, lenders can count on quality borrowers to raise their hands for a loan.

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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