Net Cost to Originate the Average Loan Rises to $5238

Mortgage profits declined in the fourthrnquarter of 2014 compared to the previous quarter but soared when compared to thernfourth quarter of 2013.  Independentrnmortgage banks and subsidiaries of chartered banks told the Mortgage BankersrnAssociation (MBA) that their average net gain on each loan they originatedrnduring the recent period was $744 compared to $150 per loan one year earlier.  During the third quarter of 2014 the gain wasrn$897.  Average production profit was 32rnbasis points in the fourth quarter, compared to an average net productionrnprofit of 42 bps in the third quarter and an average of 9 bps a year ago.<br /<br /MBA's Quarterly Mortgage Bankers Performance Report also noted that a yearrnearlier only 58 percent of companies responding to its survey reported overallrnpre-tax profits during the quarter. rnSeventy-four percent reported such profits in the fourth quarter and 83rnpercent in the third quarter of 2014.  </p

Production volume followed the samernmonth-over-month and year-over-year pattern. rnThe average of $417 million per company was down from $437 million forrnthe quarter but up from $367 million the previous year.  Volume by count per company averaged 1,769rnloans in the fourth quarter compared to 1,901 loans in the third quarter and 1,641rnloans a year ago.<br /<br /Purchase originations had a 65 percent share of the total, down from 72 percentrnin the third quarter. For the mortgage industry as a whole, MBA estimates thernpurchase share at 54 percent.  The jumbo mortgagernhad an 8.44 percent share compared to 9.42 percent the previous quarter.  The average balance of first mortgagesrnoriginated rose to an all-time high of $233,655 from $231,914 in the thirdrnquarter.<br /<br /Total loan production expenses–commissions, compensation, occupancy, equipmentrnand other production expenses and corporate allocations–increased to $7,000rnper loan from $6,769 and personnel expenses were up slightly from $4,401 perrnloan to $4,428. <br /<br /The “net cost to originate” which includes all production operatingrnexpenses and commissions, minus all fee income, but excludes secondaryrnmarketing gains, capitalized servicing, servicing released premiums andrnwarehouse interest spread, rose to $5,238 per loan from $5,038.  Productivity was unchanged at 2.4 loansrnoriginated per production employee per month. </p

Secondary marketing income rose to 266rnbasis points in the fourth quarter, compared to 261 basis points in the thirdrnquarter.<br /<br /Seventy-three percent of the 338 companies that reported fourth quarter productionrndata to the MBA were independent mortgage companies; the remaining 27 percentrnwere subsidiaries and other non-depository institutions.

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