MBA: Mortgage Originations Slightly More Profitable In Q1

Despite decreasing volume and an increase in per-loan production expenses, independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $825 on each loan they originated in the first quarter – up from $493 per loan in the fourth quarter of 2015, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.

Average production volume was $517 million per company – down from $538 million in the fourth quarter. The volume by count per company averaged 2,196 loans, down from 2,265 loans.

In a release, Marina Walsh, vice president of industry analysis for the MBA, points out that “production profits in the first quarter showed modest improvement over the fourth quarter.”

However, because volume is historically higher in the fourth quarter, it is usually more meaningful to compare the results on a year-over-year basis.

“On a year-over-year basis, production profits were still down,” Walsh says. “In the first quarter … profits were $825 per loan, or 33 basis points (bps), compared [with] $1,447 per loan, or 60 bps, in the first quarter of 2015.”

Walsh points out that the higher production revenues – which grew by $431 per loan, or 16 bps – helped compensate for the increased cost to originate.

Meanwhile, on the servicing side of the business, the decrease in mortgage interest rates “resulted in mortgage servicing right impairments and hurt profitability,” Walsh says.

“Net servicing financial income dropped to a loss of $118 per loan serviced in the first quarter from gains of $107 per loan in the fourth quarter,” she says.

Total production revenue – including fee income, secondary marking income and warehouse spread – increased to 378 bps in the first quarter compared with 362 bps in the fourth quarter.

Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $7,845 per loan, which is up from $7,747.

Personnel expenses averaged $5,141 per loan – up slightly from $5,131.

To check out the full report, click here.


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