Mortgage Bankers’ Annual Loan Profits Grow, Despite Quarterly Dip

Independent mortgage banks and mortgage subsidiaries of chartered banks earned less per loan in the fourth quarter of 2014 than they did in the previous quarter, but earned more when compared on a yearly basis, according to recent data from the Mortgage Bankers Association (MBA).

In the fourth quarter, these companies reported a net gain of $744 on each loan they originated, down from a reported gain of $897 per loan during the third quarter of 2014, the MBA reported today in its Quarterly Mortgage Bankers Performance Report.

“Production profits dropped slightly in the fourth quarter of 2014 compared to the third quarter of 2014. However on a year-over-year basis, production profits were up,” said Marina Walsh, MBA’s vice president of industry analysis, in a written statement. 

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During the fourth quarter of 2013, profits were $150 per loan, Walsh noted, while 74% of participating companies had overall positive pre-tax profits in the fourth quarter of 2014, compared to only 58% in the same quarter in 2013.

MBA’s Mortgage Bankers Performance Report records a variety of measures on the mortgage banking industry, intended as a financial and operational benchmark for independent mortgage companies. Of the 338 companies that reported production data for the fourth quarter of 2014, 73% were independent mortgage companies, while the remaining 27% were subsidiaries and other non-depository institutions. 

In terms of loan production, average volume was $417 million per company in the fourth quarter. Though volume was down from $437 million per company in the previous quarter, production was up year-over-year from the $367 million per company reported in the fourth quarter of 2013. 

Average production profit followed a similar trend in posting a quarterly decline, but yearly increase overall. In the fourth quarter of 2014, average production profit was 32 basis points, down from 42 basis points in the prior quarter, but up from the fourth quarter of 2013’s average of nine basis points. 

Profits may have been affected by increased expenses tied to loan production that increased during the quarter to $7,000 per loan, up from $6,769 in the third quarter. Such expenses, according to the MBA, included commissions, compensation, occupancy, equipment and other production expenses and corporate allocations. 

Meanwhile, personnel expenses averaged $4,428 per loan in the fourth quarter of 2014, up slightly from $4,401 per loan in the previous quarter, all while the “net cost to originate” rose from $5,038 per loan in the third quarter to $5,238 per loan in the fourth quarter of 2014. 

When it comes to the proportion of loans originated by dollar amount, the purchase share of total originations was 65% in the fourth quarter, compared to 72% in the third quarter. For the mortgage industry as a whole, MBA estimates the purchase share at 54% in the fourth quarter of 2014. 

Written by Jason Oliva

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