CFPB Mortgage Rules Strangle Banks’ Profits by 60%

Independent mortgage banks are starting to feel the sting from the Consumer Financial Protection Bureau’s (CFPB) new mortgage rules enacted last fall, particularly on their bottom lines, a recent report indicates.

Since last October’s enactment of the CFPB’s TILA-RESPA Integrated Disclosures—commonly referred to as TRID and the agency’s Know Before You Owe mortgage rules—the jury has been out on the true impact of these new regulations.

While some reports have indicated slower closing times by as much as 50 days, it now appears that new TRID rules also have a vise-like grip on banks’ profits.


During the fourth quarter of 2015, independent mortgage banks and mortgage subsidiaries of chartered banks repaired a net gain of $493 on each loan they originated—down from a reported gain of $1,238 per loan in the prior quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report released Thursday.

The decrease, which represents a 60% decline in production profits, is due to increased costs on a per loan basis during the third quarter, likely as a result of the new TRID rules, MBA suggested.

Specifically, bankers saw their total loan production expenses climb to $7,747 per loan during the fourth quarter, up from $7,080 per loan in the third quarter of 2015, according to the MBA report.

The net cost to originate was also higher in the fourth quarter at $6,163 per loan compared to $5,549 in the prior quarter. These costs include all production operating expenses and commissions, minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premium and warehouse interest spread.

Such costs reported in the fourth quarter marked the second-highest level of production expenses on a per-loan basis since the inception of MBA’s report in the third quarter of 2008, noted MBA’s Vice President of Industry Analysis Marina Walsh.

“The increases in total production expenses per loan in the fourth quarter of 2015 cannot be explained solely by volume fluctuations,” Walsh said in a written statement.

The average production volume per company, however, was nearly double the first quarter of 2014, Walsh added, when production expenses reached a study-high of $8,025 per loan.

During the fourth quarter, the average volume count per company was 2,265 loans, down from 2,609 loans in the third quarter, but up from 1,238 loans per company in the first quarter of 2014. Since the inception of the MBA Performance Report in Q3 2008, the quarterly production count has averaged 1,491 loans.

Read the MBA Mortgage Bankers Performance Report.

Written by Jason Oliva

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  • I hate to say this but the CFPB, since the inception of the “Financial Regulatory Reform Bill” (Dodd-Frank) came into fruition in 2010 has put its damaging Foot Print on the banking industry and its mortgage banking subsidiaries!

    Since last October’s enactment of the CFPB’s TRID regulations, has only compounded the problems that have already lead to many small community banks failing or merging with the larger banks.

    I don’t feel the Jury has been out since TRID has come into play, in fact, it has been a nightmare since day one! It has and still is creating havoc in the forward / traditional mortgage banking arena.

    So far TRID has not hit the reverse mortgage part of the industry. However, any company dealing only in reverse mortgages that is a subsidiary of a Federally chartered bank will indirectly feel the brunt of the new regulations some way shape or form.

    As an industry as a whole and I am referring to the entire financial industry, since the CFPB has come into play, there has never been more regulations imposed on the financial world in this county since the beginning of it.

    We as a country of free people can’t survive with all these regulations continually coming down upon us and all those that are still to come!

    John A. Smaldone

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