MBA: Independent Mortgage Banks’ Profits Down 60% in 4th Quarter as TRID Kicks In
The MBA Quarterly Mortgage Bankers Performance Report said the $493 net gain contrasted from a reported gain of $1,238 per loan in the third quarter.
“The fourth quarter marked the second highest level of production expenses per loan since inception of our report in the third quarter of 2008,” said MBA Vice President of Industry Analysis Marina Walsh.
Key findings of the report:
–Average production volume fell to $538 million per company in the fourth quarter, down from $614 million per company in the third quarter. In first-quarter 2014, when per-loan production expenses were at a study high, average production volume was $274 million per company. Since inception of the Performance Report in 2008, production volume per company has averaged $332 million.
–Volume by count per company averaged 2,265 loans in the fourth quarter, down from 2,609 loans in the third quarter. In first-quarter 2014, when per-loan production expenses were at a study high, average volume by count was 1,238 loans per company. Since the Report’s inception, quarterly production count has averaged 1,491 loans.
–Average pre-tax production profit fell to 22 basis points in the fourth quarter, compared to 55 bps in the third quarter. Since inception of the Performance Report, net production income has averaged 53 bps.
–Purchase share of total originations, by dollar volume, fell to 66 percent in the fourth quarter, down from 70 percent in the third quarter. For the mortgage industry as a whole, MBA estimates the purchase share at 53 percent in the fourth quarter.
–The jumbo share of total first mortgage originations by dollar volume was 9.34 percent in the fourth quarter, compared to 9.09 percent in the third quarter.
–The average loan balance for first mortgages increased to $238,481 in the fourth quarter, from $238,246 in the third quarter.
–Total production revenue (fee income, secondary marking income and warehouse spread) remained flat at 362 basis points in the fourth quarter.
–Total loan production expenses–commissions, compensation, occupancy, equipment and other production expenses and corporate allocations–increased to $7,747 per loan in the fourth quarter, from $7,080 in the third quarter.
–Personnel expenses averaged $5,131 per loan in the fourth quarter, up from $4,674 per loan in the third quarter.
–The “net cost to originate” rose to $6,163 per loan in the fourth quarter, up from $5,549 in the third quarter. The “net cost to originate” includes all production operating expenses and commissions, minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
–Productivity decreased to 2.4 loans originated per production employee per month in the fourth quarter, compared to 2.5 in the third quarter.
–Including all business lines, 72 percent of firms in the study posted pre-tax net financial profits in the fourth quarter, down from 86 percent in the third quarter.
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-three percent of the 334 companies that reported production data for the fourth quarter were independent mortgage companies; the remaining 27 percent were subsidiaries and other non-depository institutions.
In addition to the fourth quarter report, the Annual Performance Report on 2014 data is also available. The Annual Report on 2015 data will be available in the coming weeks. MBA produces five performance report publications per year: four quarterly reports and one annual report. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.
