"Know Before You Owe" Extends Time Requirements

Posted by on Wednesday, January 6th, 2016 at 9:01am






Impacts from new federal guidelines were felt in November, creating additional time requirements to close on a mortgage for home buyers.  Home sales were down in November, with home which otherwise have closed in November to be pushed into December. 

The average time to close on a mortgage was 49 days in November, the longest timeline since February 2013, according to Ellie Mae's latest Origination Insight Report. Conventional and FHA loans each averaged 49 days while VA loans averaged 50 days.

The National Association of Realtors® has flagged the new RESPA-TILA "Know Before You Owe" mortgage regulations, which took effect Oct. 3, as the likely culprit for the longer closing times.

NAR reported last month that existing-home sales dipped significantly in November, reaching their slowest pace in more than a year and a half. According to the Realtors November Confidence Index, 47 percent of real estate professionals said that they were seeing longer closing times from a year ago, up from 37 percent in October.

"We are beginning to see the anticipated impacts of the Know Before You Owe changes that went into effect in October," says 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, we've seen the percentage of refinances increase to 46 percent of all closed loans, most likely driven by a recent dip in rates over the last three months since the 2015 high point in August."

NAR Chief Economist Lawrence Yun said in a statement last week that the longer time frames to closing likely pushed would-be November transactions into December. Still, closing rates for all loans reached their highest point in November at 68.4 percent, according to Ellie Mae's report. Ellie Mae began tracking such data in August of 2011.

Ellie Mae's report also showed that the average FICO score on loans originated in November was 721 – the sixth consecutive month the average score declined. Average FICO scores for all loans has fallen 10 points since January.

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