Mortgage production increased 3.9% in the fourth quarter of 2014 compared to the third quarter, bringing production to the highest level since the second quarter of 2013, according to a recent report from business advisory and technology firm Richey May & Co.
In addition, gross loan margins were up by 4.3 basis points (bps) and pre-tax profits shrank by 28.4 bps, according to the firm's trend report.
Purchase volume decreased by a modest 6% compared to the previous quarter while refinance volume increased to 28.4%. The increase in refinances was due mainly to low interest rates.
The report analyzes origination data from about 40 independent lenders.
The firm says the fourth quarter was representative of the year as a whole, with decent production and good margins, but minimal pre-tax profits.
Per-loan operating expenses increased during the fourth quarter after declining during first three quarters of 2014. For the entire year they averaged $1,873 per loan.
‘With production volume and margins both up during the fourth quarter, the increase in operating expenses on a per-loan basis is less an indication of overcapacity and more a result of lenders making needed investments in technology and infrastructure,’ explains Kenneth Richey, managing partner of Richey May, in a release. ‘Many are increasing their footprints in their markets and expanding to other areas, hiring personnel and recruiting branches. This is an important trend to watch in 2015. Expenditures like these typically precede any increase in production by at least a quarter.’
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