U.S. Independent Mortgage Banks' Profits Up in Q1

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According to the Mortgage Bankers Association's Quarterly Mortgage Bankers Performance Report, independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,447 on each loan they originated in the first quarter of 2015, up from a reported gain of $744 per loan in the fourth quarter of 2014.
 
"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. "However, 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."

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

Other key findings of MBA's Quarterly Mortgage Bankers Performance 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 51 percent in the first quarter of 2015, compared to 65 percent in the fourth quarter of 2014.  For the mortgage industry as a whole, MBA estimates the purchase share at 44 percent in the first quarter of 2015. 

• The jumbo share of total first mortgage originations by volume was 8.74 percent in the first quarter compared to 8.44 percent 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.

Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations - increased to $7,195 per loan in the first quarter of 2015, from $7,000 in the fourth quarter of 2014. 

• Personnel expenses averaged $4,675 per loan in the first quarter of 2015, up from $4,428 per loan in the fourth quarter. 

• 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 was unchanged at 2.4 loans originated per production employee per month in the first quarter of 2015.

• Including all business lines, 88 percent of the firms in the study posted pre-tax net financial profits in the first quarter of 2015, up from 74 percent in the fourth quarter of 2014.