Mortgage Banking Profits Hit Hard in 2nd Half of 2013

Mortgagernbanks had what the Mortgage Bankers Association (MBA) termed “respectable”rnproduction profits in 2013, even though they were dramatically lower than inrn2012 and declined precipitously from the first half of 2013 to the second. MBA’srnAnnual Mortgage Bankers Performance Report said that banks responding to itsrnsurvey posted average per loan profits of $1,252 in 2013 compared to $2,199 perrnloan originated in 2012.  Of the 242 firms that reported production, 73rnpercent were independent mortgage companies; the remaining 27 percent werernsubsidiaries of chartered banks and other non-depository institutions.</p

“Full-year 2013 netrnproduction profits were respectable,” said Marina Walsh, MBA’s Vice Presidentrnof Industry Analysis.  “In fact, they were the second highest recordedrnsince inception of the Performance Report in 2008.  However, netrnproduction profits in the second half of 2013 were substantially lower thanrnthose in the first half of 2013.  While secondary marketing gains remainedrnrelatively strong throughout the year, per-loan production expenses escalatedrnin the second half of 2013.”</p

Average productionrnprofit (net production income) was 61 basis points in 2013, compared to 108rnbasis points in 2012.  However that production income averaged 80 basisrnpoints in the first half of the year then dropped to 27 basis points in thernsecond half. </p

Including all businessrnlines, 91 percent of the firms in the study posted pre-tax net financialrnprofits in 2013, down from 97 percent in 2012.  In the first half of 2013rn95 percent of reporting firms posted pre-tax financial profits, compared to 69rnpercent in the second half of 2013.</p

Commissions,rncompensation, occupancy, equipment, and other production expenses and corporaternallocations increased to $5,948 per loan in 2013 compared to $5,137 inrn2012.  In the first half of 2013, total production expenses averagedrn$5,743 per loan, then rose to $6,539 per loan in the second half of 2013.  Personnel expenses averaged $3,910 per loanrnin 2013, up from $3,285 per loan in 2012.</p

The “net cost tornoriginate” which includes all production operating expenses and commissionrnminus all fee income was $4,298 per loan in 2013, up from $3,323 in 2012. rnNet cost to originate excludes secondary marketing gains, capitalizedrnservicing, servicing released premiums, and warehouse interest spread.</p

Average productionrnvolume was $1.75 billion (7,857 loans) per company in 2013, compared to $1.72rnbillion (7,699 loans) per company in 2012.  For those companies whornresponded to both 2012 and 2013 MBA surveys the average production volume wasrnflat at $1.81 billion (8,083 loans in 2013 and 8,098 loans in 2012).  Each production employee originated 2.6 loansrnper month during the year compared to 3.7 loans in 2012. 

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