Profits pocketed by independent banks
and banks' mortgage subsidiaries plunged in the fourth quarter of 2013 the
Mortgage Bankers Association (MBA) said on Wednesday. On a
per-loan-originated basis the average profit fell from $743 in the third
quarter to only $150 in the fourth.
said, that these profits were at their lowest levels since it implemented its
Quarterly Mortgage Bankers Performance Report in 2008; a result of loan production
expenses reaching their highest level in study history. These loan production expenses - commissions, compensation, occupancy,
equipment, and other production expenses and corporate allocations - increased
to $6,959 per loan in the fourth quarter, up from $6,368 in the third quarter
and of course occurred in a declining mortgage market.
For those companies in
mortgage servicing, net servicing income per loan increased to $355 in the
fourth quarter from $224 in the third quarter. In basis points (bps), the
average servicing profit was 19 in the fourth quarter of 2013, compared to 12 in
the third quarter. Marina Walsh,
MBA's Vice President of Industry Analysis noted the improving situation in
mortgage servicing but said,
"Not all mortgage companies retained mortgage servicing rights or generated
margins large enough to offset production losses. It is perhaps not
surprising that only 58 percent of participating companies had overall positive
pre-tax profits in the quarter."
MBA said that the average production profits (net production
income) was 9 bps in Q4 compared to 38 bps in the third quarter. It was the fifth consecutive quarter that
production profits decreased. Secondary
marketing income increased by 4 bps in the fourth quarter, to 248 bps.
averaged $4,385 per loan in the fourth quarter, up from $4,130 per loan in the
The "net cost to
originate" was $5,171 per loan in the fourth quarter, up from $4,573 in
the third quarter. This category includes all production operating expenses
and commissions, minus all fee income, but excluding secondary marketing gains,
capitalized servicing, servicing released premiums, and warehouse interest
Average production volume was $367 million per company in the
fourth quarter of 2013, down from $391 million per company in the third
quarter. Companies originated an average of 1,641 loans in the fourth
quarter, down from 1,788 in the third quarter.
Originations for home purchases represented 69 percent of the dollar
volume of originations, up from 67 percent in the previous quarter. Industry-wide the purchase share is estimated
at 47 percent in the fourth quarter, down from 49 percent in the previous
The productivity rate
was 2.0 loans per production employee per month, a decline from 2.5 loans in
the third quarter.
Including all business
lines, 58 percent of the firms in the study posted pre-tax net financial
profits in the fourth quarter of 2013, down from 74 percent in the third quarter,
and 92 percent in second quarter.
Seventy-three percent of the 299 companies that reported production data
for the fourth quarter report were independent mortgage companies.