Mortgage Profits Doubled in Q1

Mortgage profits soared in the first quarter of 2015 thernMortgage Bankers Association (MBA) said this week, nearly doubling the per loan netrnproduced in the fourth quarter of 2014. rnIndependent mortgage banks and subsidiaries of chartered banks reported increasedrnrefinancing volume and secondary marketing gains allowed them to compensate forrnincreased origination costs. </p

According to MBA’s QuarterlyrnMortgage Bankers Performance Report, banks had a net gain of $1,447 onrneach loan they originated during the quarter. rnIn the previous period they reported a gain of $744 per loan.   </p

“Net production profitsrnamong independent mortgage bankers nearly doubled from the fourth quarter ofrn2014 and secondary marketing gains improved by 31 basis points over the fourthrnquarter, based largely on the increase in refinancing volume in the firstrnquarter of 2015,” said MBA Vice President of Industry Analysis Marina Walsh.rn”However, total production operating expenses per loan remained a challenge,rnrising to $7,195 per loan in the first quarter of 2015, from $7,000 per loan inrnthe fourth quarter of 2014.”</p

Walsh continued: “In fact,rnorigination costs in the first quarter are elevated compared to quarters withrnsimilar production volume within the past few years.”</p

A total of 359 companiesrnreported production data to MBA. rnSeventy-three percent were independent mortgage companies, the remainderrnwere subsidiaries and other non-depository institutions.  Including all business lines, 88 percent ofrnthe firms in the study posted pre-tax net financial profits in the firstrnquarter of 2015, up from 74 percent in the fourth quarter of 2014.  </p

Respondents reported an averagernproduction volume of $473 million in the first quarter compared to $417 millionrnper company in the fourth quarter of 2014.  Loan volume averaged 1,917rnloans, up from 1,769 the previous quarter.  </p

Per loan productionrnexpenses – commissions, compensation, occupancy, equipment, and otherrnproduction expenses and corporate allocations – increased, as Walsh pointed out,rnfrom $7,000 in the fourth quarter to $7,195. Personnel expenses averaged $4,675rnper loan compared to $4,428.   </p

The “net cost tornoriginate” was $5,597 per loan compared to $5,283 in the fourthrnquarter.  This figure includes all production operating expenses andrncommissions, minus all fee income, but excludes secondary marketing gains,rncapitalized servicing, servicing released premiums, and warehouse interestrnspread. Secondary marketing income increased to 297 basis points from 266rnbasis points. </p

The average productionrnprofit was 60 basis points (bps) in the first quarter, compared to an averagernnet production profit of 32 bps in the fourth quarter of 2014. 

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