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Mortgage

Independent mortgage bank profits surge nearly 100%

But total production operating expenses rise too

Independent mortgage banks and mortgage subsidiaries of chartered banks recorded a net gain of $1,447 on each loan they originated in the first quarter of 2015, which is double the $744 per loan in the fourth quarter of 2014, the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report said.

“Net production profits among independent mortgage bankers nearly doubled from the fourth quarter of 2014 and secondary marketing gains improved by 31 basis points over the fourth quarter, based largely on the increase in refinancing volume in the first quarter of 2015,” said MBA Vice President of Industry Analysis Marina Walsh.

But despite the surge in income, Walsh noted that total production operating expenses per loan remained a challenge, rising to $7,195 per loan in the first quarter of 2015, from $7,000 per loan in the fourth quarter of 2014.

“In fact, origination costs in the first quarter are elevated compared to quarters with similar production volume within the past few years,” Walsh continued.

Furthermore, personnel expenses averaged $4,675 per loan in the first quarter of 2015, up from $4,428 per loan in the fourth quarter, while the "net cost to originate" was $5,597 per loan in the first quarter of 2015, up from $5,283 in the fourth 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 remained unchanged at 2.4 loans originated per production employee per month in the first quarter of 2015. 

While the cost of originating a mortgage was once called ridiculous and astronomical, it started to pick up in recent quarters. 

Other key findings in the MBA’s report include:

  • Average production volume was $473 million per company in the first quarter of 2015, up from $417 million per company in the fourth quarter of 2014. The volume by count per company averaged 1,917 loans in the first quarter of 2015, up from 1,769 loans in the fourth quarter of 2014. 
  • The average production profit was 60 basis points (bps) in the first quarter, compared to an average net production profit of 32 bps in the fourth quarter of 2014. 
  • The purchase share of total originations, by dollar volume, was 5% in the first quarter of 2015, compared to 65% in the fourth quarter of 2014. For the mortgage industry as a whole, MBA estimates the purchase share at 44% in the first quarter of 2015.  
  • The jumbo share of total first mortgage originations by volume was 8.74% in the first quarter compared to 8.44% in the fourth quarter.  
  • The average loan balance for first mortgages grew to a study high of $242,791 in the first quarter of 2015, from $233,655 in the fourth quarter. 
  • Secondary marketing income was 297 basis points in the first quarter of 2015, up from 266 basis points in the fourth quarter. 

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