Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net profit of $744 on each loan they originated in the fourth quarter of 2014, down from $897 per loan in the third quarter but up considerably from $150 per loan in the fourth quarter of 2013, according to the Mortgage Bankers Association's (MBA) Quarterly Mortgage Bankers Performance Report.
About 74% of the lenders that participated in the study had overall positive pre-tax profits in the fourth quarter, compared to only 58% in the fourth quarter of 2013.
Average production volume was $417 million per company, down from $437 million per company in the third quarter but up from $367 million per company in the fourth quarter of 2013.
The average number of loans originated per company during the course of the year was 1,769, down from 1,901 in the third quarter but up from 1,641 in the fourth quarter of 2013.
The average production profit was 32 basis points (bps), compared to an average net production profit of 42 bps in the third quarter and an average of 9 bps in the fourth quarter of 2013.
The report also shows that the industry shifted back toward a refinance market in the fourth quarter – due mainly to historically low interest rates. The purchase share of total originations, by dollar volume, was 65% in the fourth quarter, compared to 72% in the third quarter of 2014.
The MBA estimates the purchase share for the entire mortgage industry for the fourth quarter was about 54%.
The jumbo share of total first mortgage originations was 8.44%, compared to 9.42% in the third quarter.
The average loan balance for first mortgages was $233,655, up from $231,914 in the third quarter.
Secondary marketing income was 266 basis points in the fourth quarter, compared to 261 basis points in the third quarter.
Total loan production expenses – including commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – increased to an average of $7,000 per loan, up from $6,769 in the third quarter.
Personnel expenses averaged $4,428 per loan, up from $4,401 in the third quarter.
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 $5,238 per loan, up from $5,038 in the third quarter.
Productivity was unchanged at 2.4 loans originated per production employee per month.
The quarterly report is based on data voluntarily provided by 73% of 338 lenders that were asked to participate.