The Mortgage Bankers Association is
reporting a net per-loan loss was suffered by those independent mortgage banks and mortgage subsidiaries of
chartered banks which participated in its first quarter performance
survey. Banks reported that the $150 profit
per loan they netted in the fourth quarter of 2013 turned into a net loss of
$194 in the first quarter of 2014.
"The significant overall production
volume decline in the first quarter hurt mortgage bankers," said Marina Walsh,
MBA's Vice President of Industry Analysis. "Purchase volume did not
pick-up, while refinancing volume dropped and costs continued to rise.
Given these conditions, companies that managed to break even in the first
quarter should consider that a reasonable outcome."
MBA's Quarterly Mortgage Bankers
Performance Report showed average production loss during the quarter was 8.31
basis points compared to a production profit of 8.72 basis points the previous
quarter. This was the sixth consecutive
quarter of declining production income.
Companies had an average production
volume of $274 million on an average loan volume of 1,248. This is a significant downturn from the $367
million from 1,641 loans that were the averages in the fourth quarter of 2013.
MBA said that 331 companies reported
production data for the first quarter.
Seventy-five percent were independent mortgage companies and the
remaining 25 percent were subsidiaries and other non-depository
The purchase share of total
originations, by dollar volume, was relatively flat at 68 percent in the first
quarter of 2014. For the mortgage industry as a whole, MBA
estimates the purchase share at 51 percent in the first quarter of 2014, from
47 percent in the fourth quarter of 2013.
Total loan production expenses
including commissions, compensation, occupancy, equipment, and other production
expenses and corporate allocations, increased to $8,025 per loan in the first
quarter from $6,959. These expenses were
the highest recorded in any quarter since the Performance Report was created in
the third quarter of 2008. Personnel
expenses averaged $5,048 per loan in the first quarter compared to $4,385 in
the fourth quarter.
The "net cost to
originate" was $6,253 per loan. This 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. This line item averaged $5,171 per loan in the
fourth quarter of 2013. Secondary marketing income increased to 277 basis
points in the first quarter, compared to 248 basis points in the fourth quarter
Companies originated 1.7 loans per production employee per month in the first
quarter, down from 2 loans in the fourth quarter of 2013.
Including all business lines, 54 percent of the firms in the study posted
pre-tax net financial profits in the first quarter of 2014, down from 58
percent in fourth quarter of 2013, and 94 percent in the first quarter of 2013.