Loan Profits Were Already Down 14 Percent Before July

Mortgage loan profits tumbled by 14rnpercent in the second quarter of 2013 the Mortgage Bankers Association (MBA) saidrnon Friday.  Independent mortgage banksrnand mortgage subsidiaries of chartered banks reporting to an MBA survey saidrnthey had an average profit of $1,528 on each loan they originated during thernquarter compared to $1,772 on each loan in Quarter 1.  In basis points, the average productionrnprofit or net income was 75 basis points, down from 86 basis points in thernprevious quarter.</p

MBA’s Quarterly Mortgage Bankers Performance Report said that, measuredrnby dollar volume, the purchase share of originations increased from 40 percentrnin the first quarter to 52 percent in the second.  This was the first time purchase originationsrnhad taken the majority share of originations since the third quarter ofrn2011.  MBA estimates that the purchasernshare for the entire industry was 36 percent in the second quarter compared torn26 percent in the first.</p

 “Whilernoverall volume remained relatively flat, we are seeing a shift in product mixrntowards purchase originations,” said MBA Associate Vice President of IndustryrnAnalysis Marina Walsh. “Per-loan production costs continue tornrise and there are signs of pricing pressure as evidenced by the reduction inrnsecondary marketing income.”</p

Total loan productionrnexpenses–commissions, compensation, occupancy, equipment, and other productionrnexpenses and corporate allocations–increased to $5,818 per loan in the secondrnquarter, from $5,779 in the first quarter. Personnel expenses averaged $3,808rnper loan compared to $3,785 previously. </p

Companies reporting to MBA regardingrntheir second quarter operations had an average of 261 production employees, tenrnmore than the average reported in the first quarter.  However, among those companies which reportedrnin both quarters, the average had increased to 271.  Productivity was down slightly to 2.9 loansrnper production employee per month from 3.1 loans in the first quarter.</p

The net cost to originate, including all production operating expenses andrncommissions minus all fee income was $4,207, up from $4,182 per loan.  The net cost to originate excludes secondaryrnmarketing gains, capitalized servicing, servicing released premiums, and warehouserninterest spread.  Secondary marketingrnincome declined to 263 basis points in the second quarter, compared to 274rnbasis points in the first quarter</p

Lenders reported they had originated anrnaverage of 1,921 loans in the second quarter, slightly fewer than in the firstrnquarter when the average was 1,953. rnAverage production income was $439 million per company, down from $442rnmillion.  92 percent of the firms in thernstudy posted pre-tax net financial profits in the second quarter, down from 94rnpercent of the firms in the first quarter.

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