Despite increased operating costs, due mainly to new regulations, 2015 wasn’t a bad year for mortgage bankers – at least volume-wise.
According to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report, the average profit per loan increased for independent mortgage banks and mortgage subsidiaries of chartered banks during the year. The improved performance was driven mainly by higher volume and larger loan balances.
Lenders made an average profit of $1,189 on each loan they originated in 2015 – up from $747 in 2014, according to the report.
In basis points, the average production profit (net production income) was 52 basis points compared with 34 basis points in 2014, the MBA says in a release.
In the first half of 2015, net production income averaged 65 basis points, but in the second half, it dropped to 39 basis points. The average production profit for the period of 2008-2015 was 55 basis points.
The increase in average profit per loan, however, has more to do with volume and scale than anything else. Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $7,046 per loan in 2015, which is up slightly from $6,950 in 2014.
In the first half of 2015, total production expenses averaged $6,893 per loan then rose to $7,272 per loan in the second half. Although the MBA’s release does not say so, some of the increase in the second half was likely due to implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID) rule that took effect on Oct. 3.
TRID may also be partly the cause of average personnel expenses rising to $4,699 per loan in 2015 from $4,500 in 2014.
The “net cost to originate” – which includes all production operating expenses and commissions, minus all fee income, but excluding secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread – was $5,567 per loan in 2015, which is up from $5,200 in 2014.
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