New 'Know Before You Owe' Mortgage Rules Slowing Down Closings

The average time to close a mortgage loan increased by 3 days to 49 total days in November, the longest time to close since February of 2013, according to the latest data from mortgage-processing firm Ellie Mae.

The average time to close FHA (Federal Housing Administration), Conventional and VA loans all increased to 49, 49 and 50 days, respectively, Ellie Mae reports. The surge in closing time could be due to lenders adjusting to the new RESPA-TILA (Know Before You Owe) federal rules, which are meant to make mortgage terms easier to understand for borrowers.
The rule changes, implemented by the Consumer Financial Protection Bureau in October, apply to the forms borrowers receive when they make an application and before they close on a mortgage. The rules also require lenders to give borrowers final terms of a loan at least three business days before closing.
Lenders say the new mortgage form rules have created major technical and training challenges.
“We are beginning to see the anticipated impacts of the Know Before You Owe changes that went into effect in October,” said Jonathan Corr, president and CEO of Ellie Mae. “The time to close loans has crept up to 49 days, a 3-day increase over October, while the closing rate on purchased loans increased to 72 percent.
Additionally, Ellie Mae says that the percentage of refinances increased to 46 percent of all closed loans, most likely fueled by a recent dip in rates over the last three months.
Ellie Mae’s data also shows that the average FICO score on all closed loans fell to 721, marking the sixth consecutive month of decline. The driver of the FICO reduction appears to be average FHA refinance FICO scores falling for the second straight month to 648.
Closing rates for all loans reached their highest point, 68 percent, since Ellie Mae began tracking data in August of 2011. The closing rate on purchase loans increased to 72 percent.

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