Mortgage profits took a big hit in the third quarter
of 2013, dropping by more than half of that reported in the second
quarter. The Mortgage Bankers
Association (MBA) said independent mortgage banks and mortgage subsidiaries of
chartered banks reported an average of $743 per loan profit in the third quarter
compared to $1,528 for each loan originated in the second quarter. The average production income fell from 75
basis points to 38, marking the fourth consecutive quarter that productions
profits have declined.
were reduced by half because of several factors: per-loan production expenses
that reached study-highs, declining production volume and reduced secondary
marketing income," said Marina Walsh, MBA's Associate Vice President of
Industry Analysis. "Historically, mortgage bankers have struggled to
control fixed costs and right-size in a declining market, and the increasing
costs of compliance and quality control only exacerbate an already difficult
income declined to 244 basis points in the third quarter, compared to 263 basis
points in the second quarter.
Companies reported an
average production volume of $391 million per company compared to $439 million
in the second quarter as loan volume fell from an average of 1,921 loans to 1,788.
As volume decreased total loan production expenses including commissions,
compensation, occupancy, equipment and corporate allocations increased to $6,368
per loan from $5,818 in the second quarter. Third quarter 2013 production
expenses were the highest recorded in any quarter since the MBA's Quarterly Mortgage Bankers Performance Report began
in the third quarter of
The "net cost to
originate" was $4,573 per loan in the third quarter, up from $4,207 in the
second quarter. The "net cost to originate" includes all
production operating expenses and commissions minus all fee income, but excludes
secondary marketing gains, capitalized servicing, servicing released premiums,
and warehouse interest spread.
Firms had an average of
259 production employees compared to 261 in the second quarter. Among those companies reporting in both
quarters the average dropped from 269 to 259. Productivity fell from 2.9 loans per employee
per month to 2.5 loans. Personnel expenses averaged $4,130 per loan in
the third quarter against $3,808 in the second.
The purchase share of
total originations, by dollar volume, increased to 67 percent in the third
quarter of 2013, up from 52 percent in the second quarter. For the
mortgage industry as whole, MBA estimates the purchase share at 49 percent in
the third quarter of 2013, up from 34 percent in the second quarter.
MBA said that 324
companies responded to its third quarter survey, 74 percent of which were
independent mortgage companies.