Independent Mortgage Bank Profits Dip in U.S.

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Based on the Mortgage Bankers Association's latest Quarterly Mortgage Bankers Performance Report, 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 second quarter of 2015.

"Production profits dropped slightly in the third quarter of 2015 compared to the second quarter of 2015.  However, on a year-over-year basis, production profits were up," said Marina Walsh, MBA's Vice President of Industry Analysis. "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.   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.  At the same time, the share of purchase production to total production by dollar volume was similar at 70 and 72 percent respectively."
 
Other key findings of MBA's Quarterly Mortgage Bankers Performance Report for Q3 include:

• Average production volume reached $614 million per company in the third quarter of 2015, down from the study-high $657 million per company in the second quarter of 2015.  The volume by count per company averaged 2,609 loans in the third quarter of 2015, down from the study-high 2,714 loans in the second quarter of 2015. Despite this decrease, the third quarter average production volume in both dollar and count was the second highest reported since inception of the Performance Report in the third quarter of 2008.

• The average pre-tax production profit was 55 basis points (bps) in the third quarter, compared to an average net production profit of 67 bps in the second quarter of 2015.  Since the inception of the Performance Report in the third quarter of 2008, net production income has averaged 54 bps.

• The purchase share of total originations, by dollar volume, was 70 percent in the third quarter of 2015, up from 62 percent in the second quarter of 2015.  For the mortgage industry as a whole, MBA estimates the purchase share at 63 percent in the third quarter of 2015. 

• The jumbo share of total first mortgage originations by dollar volume was 9.09 percent in the third quarter compared to 9.07 percent in the second quarter. 

• The average loan balance for first mortgages decreased to $241,942 in the third quarter of 2015, from $244,350 in the second quarter.

• Secondary marketing income was 290 basis points in the third quarter of 2015, down from 294 basis points in the second quarter.

• Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations - increased to $7,080 per loan in the third quarter of 2015, from $6,984 in the second quarter of 2015. 

• Personnel expenses averaged $4,674 per loan in the third quarter of 2015, up from $4,632 per loan in the second quarter. 

• The "net cost to originate" was $5,549 per loan in the third quarter of 2015, up from $5,372 in the second 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 decreased to 2.5 loans originated per production employee per month in the third quarter of 2015 compared to 2.8 in the second quarter.

• The average pre-tax servicing profit dropped to a loss of $52 per loan serviced in the third quarter of 2015, from a gain of $196 per loan serviced in the second quarter of 2015.

• Including all business lines, 86 percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2015, down from 92 percent in the second quarter of 2015.