MBA: Profits Up in 2015, Driven by Higher Volume, Larger Loan Balances
Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,189 on each loan they originated in 2015, from $747 per loan in 2014, the Mortgage Bankers Association reported this morning.
The MBA Annual Mortgage Bankers Performance Report said despite a drop in profits in the second half of 2015 compared to the first half, full-year 2015 net production profits rose to 52 basis points, 18 basis points higher year over year, with higher production volume.
“Profits in 2015 were just below the annual average of 55 basis points since the inception of the Performance Report in 2008,” said MBA Vice President of Industry Analysis Marina Walsh. “However, because of larger loan balances, per-loan profits were at their third highest levels since 2008. Average loan balances for this sample grew 7 percent from 2014 to 2015 and have grown 22 percent since 2008.”
Other key findings of the report:
–In basis points, average production profit (net production income) rose to 52 basis points in 2015, compared to 34 basis points in 2014. In the first half of 2015, net production income averaged 65 basis points, then dropped to 39 basis points in the second half. The average production profit for the period 2008-2015 was 55 basis points.
–Average production volume rose to $2.40 billion (9,906 loans) per company in 2015, compared to $1.57 billion (6,779 loans) per company in 2014. On a repeater company basis, average production volume increased by 48 percent to $2.48 billion (10,183 loans) in 2015, from $1.68 billion (7,243 loans) in 2014.
–Average loan balances increased by 7 percent to $239,265 from $223,108 in 2014.
–Total loan production expenses–commissions, compensation, occupancy, equipment and other production expenses and corporate allocations–increased to $7,046 per loan in 2015, up slightly from $6,950 in 2014. In the first half of 2015, total production expenses averaged $6,893 per loan, then rose to $7,272 per loan in the second half.
–Personnel expenses averaged $4,699 per loan in 2015, up from $4,500 per loan in 2014.
–The “net cost to originate” was $5,567 per loan in 2015, up from $5,200 in 2014. This includes all production operating expenses and commissions, minus all fee income, but excluding secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
–Productivity rose to 2.20 loans originated per production employee per month in 2015, up from 2.05 in 2014.
–Secondary marketing income plus origination fees rose to 330 basis points in 2015, from 321 basis points in 2014.
–The purchase share of total originations, by dollar volume, decreased to 64 percent in 2015, from 71 percent in 2014. For the mortgage industry as whole, MBA estimated the purchase share at 54 percent in 2015, down from 60 percent in 2014.
–Including all business lines, 92 percent of firms in the study posted pre-tax net financial profits in 2015, up from 82 percent in 2014. In the first half of 2015, 93 percent of reporting firms posted pre-tax financial profits, compared to 83 percent in the second half.
The MBA Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries, and other non-depository institutions. Seventy-two percent of the 276 companies that reported production data for the full-year 2015 were independent mortgage companies; the remaining 28 percent were subsidiaries and other non-depository institutions.
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