Mortgage banks substantially improved
their bottom line numbers in the second quarter after posting a loss on every
loan written during the first quarter of the year. The Mortgage Bankers Association (MBA) said Independent mortgage banks and mortgage
subsidiaries of chartered banks reported a net gain of $954 on each loan they originated
in the second quarter, up from a reported loss of $194 per loan the quarter
"The gains seen in the second quarter come after first quarter
losses that were likely triggered by a variety of factors including the
implementation of new Dodd-Frank regulations and extremely low origination
volumes," said Marina Walsh, MBA's Vice President of Industry Analysis.
"Some loan closings may have been pushed into the second quarter, resulting in
an increase in profitability as per-loan production costs declined."
Those total loan
production expenses - commissions, compensation, occupancy, equipment, and
other production expenses and corporate allocations - decreased to $6,932 per
loan in the second quarter of 2014, from $8,025 in the first quarter. The
$1,093 reduction was the largest in any single quarter since the inception of
the MBA's Quarterly Mortgage Bankers Performance Report in the first quarter of
The current Performance Report says that the average
production profit was 45.70 basis points in compared to an average net
production loss of 8.31 basis points (bps) in the first quarter of the
year. Despite the increase the second quarter, net production income is
well below the average of 54.33 bps and the median of 52.05 bps published by
the MBA's report across its publication history.
Production volume averaged $378 million per company in Q2 compared
to $274 million in Q1, an increase of 38 percent. The average volume by
count rose to 1,676 loans from 1,238.
represented 74 percent of the dollar volume of all mortgages originated in the
quarter compared to 68 percent the previous period. MBA estimates that the purchase share for the
mortgage industry as a whole was 59 percent in the second quarter, up from 51
percent in the first.
The jumbo share of total
first mortgage originations continued to increase, rising to 7 percent in the
second quarter, the highest level in the Report's history. MBA'S Weekly Mortgage Applications Survey and
its monthly credit availability data confirm a strong growth in jumbo
income was 270 basis points in the second quarter, 7 bps lower than in the
averaged $4,423 per loan in the second quarter of 2014, down from $5,048 per
loan in the first quarter. This was primarily driven by a reduction in
per loan fulfillment, support and benefit expenses. Productivity was 2.30
loans originated per production employee per month in the second quarter of
2014, up from 1.70 in the first quarter.
The "net cost to
originate" was $5,074 per loan, down from $6,253 in the first
quarter. The "net cost to originate" 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.
Including all business
lines, 81 percent of the firms in the study posted pre-tax net financial
profits in the second quarter, up from the 54 percent which did so the previous
quarter, but down from the 92 percent seen in the second quarter of 2013.
Seventy-three percent of
the 349 companies that reported production data for the second quarter
Production Report were independent mortgage companies and the remaining 27
percent were subsidiaries and other non-depository institutions.