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For Originators in Q1, Breaking Even was a Win
The Mortgage Bankers Association isrnreporting a net per-loan loss was suffered by those independent mortgage banks and mortgage subsidiaries ofrnchartered banks which participated in its first quarter performancernsurvey. Banks reported that the $150 profitrnper loan they netted in the fourth quarter of 2013 turned into a net loss ofrn$194 in the first quarter of 2014. </p
“The significant overall productionrnvolume decline in the first quarter hurt mortgage bankers,” said Marina Walsh,rnMBA’s Vice President of Industry Analysis. “Purchase volume did not</bpick-up, while refinancing volume dropped and costs continued to rise. rnGiven these conditions, companies that managed to break even in the firstrnquarter should consider that a reasonable outcome." </p
MBA’s Quarterly Mortgage BankersrnPerformance Report showed average production loss during the quarter was 8.31rnbasis points compared to a production profit of 8.72 basis points the previousrnquarter. This was the sixth consecutivernquarter of declining production income. </p
Companies had an average productionrnvolume of $274 million on an average loan volume of 1,248. This is a significant downturn from the $367rnmillion from 1,641 loans that were the averages in the fourth quarter of 2013. </p
MBA said that 331 companies reportedrnproduction data for the first quarter. rnSeventy-five percent were independent mortgage companies and thernremaining 25 percent were subsidiaries and other non-depositoryrninstitutions. </p
The purchase share of totalrnoriginations, by dollar volume, was relatively flat at 68 percent in the firstrnquarter of 2014. For the mortgage industry as a whole, MBArnestimates the purchase share at 51 percent in the first quarter of 2014, fromrn47 percent in the fourth quarter of 2013.</p
Total loan production expenses</bincluding commissions, compensation, occupancy, equipment, and other productionrnexpenses and corporate allocations, increased to $8,025 per loan in the firstrnquarter from $6,959. These expenses werernthe highest recorded in any quarter since the Performance Report was created inrnthe third quarter of 2008. Personnelrnexpenses averaged $5,048 per loan in the first quarter compared to $4,385 inrnthe fourth quarter. </p
The “net cost tornoriginate” was $6,253 per loan. This includes all production operatingrnexpenses and commissions, minus all fee income, but excluding secondaryrnmarketing gains, capitalized servicing, servicing released premiums, andrnwarehouse interest spread. This line item averaged $5,171 per loan in thernfourth quarter of 2013. Secondary marketing income increased to 277 basisrnpoints in the first quarter, compared to 248 basis points in the fourth quarterrnof 2013.<br /<br /Companies originated 1.7 loans per production employee per month in the firstrnquarter, down from 2 loans in the fourth quarter of 2013.<br /<br /Including all business lines, 54 percent of the firms in the study postedrnpre-tax net financial profits in the first quarter of 2014, down from 58rnpercent in fourth quarter of 2013, and 94 percent in the first quarter of 2013.rn
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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