On a quarterly basis, profits for independent mortgage banks were lower in the third quarter of 2015, but higher compared to last year’s reported levels, according to recent mortgage industry data.
Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,238 on each loan they originated in the third quarter of 2015, down from a reported gain of $1,522 per loan in the previous quarter, according to the Quarterly Mortgage Bankers Performance Report from the Mortgage Bankers Association (MBA).
MBA’s report 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.
Of the 363 companies that reported production data for the third quarter of 2015 report, 74% were independent mortgage companies and the remaining 26% were subsidiaries and other non-depository institutions.
In the third quarter of 2015, profits were $1,238 per loan (55 basis points), compared to $897 per loan (42 basis points) in the third quarter of 2014, noted Marina Walsh, MBA’s vice president of industry analysis.
“The average production volume in the third quarter of 2015 was significantly higher at $614 million per company, compared to $437 million per company in the third quarter of 2014,” Walsh said in a written statement. “At the same time, the share of purchase production to total production by dollar volume was similar at 70 and 72 percent respectively.”
The $614 million average production volume per company reported in the third quarter was down from MBA’s study-high $657 million per company recorded during the second quarter.
Meanwhile, the volume by count per company averaged 2,609 loans in the third quarter, down from the study-high of 2,714 loans, also reported in the second quarter of this year. Despite this decrease, MBA notes the third quarter average production volume in both dollar and count was the second-highest reported since the inception of the Performance Report in the third quarter of 2008.
Perhaps contributing to the decrease in profits on a quarterly basis, a number of third quarter costs and expenses were higher when compared to the previous quarter.
For instance, total loan production expenses—commission, compensation, occupancy, equipment and other production expenses—increased to $7,080 per loan in the third quarter of 2015, up just 1.4% from $6,984 in the second quarter of 2015.
Personnel expenses also increased during the third quarter, averaging $4,674 per loan compared to $4,632 per loan in the prior quarter.
The “net cost to originate” was $5,549 per loan in the third quarter of 2015, an increase from $5,372 in the second quarter. This “net cost” 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.
Written by Jason Oliva