Mortgage bankers realized a net gain of $1,182 on each loan they originated in the fourth quarter, down from $1,924 per loan in the third quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.
Despite the quarterly decline in net production profits, lenders had the most profitable fourth quarter since 2012, the MBA says.
What’s more, the decrease was in keeping with seasonal cycles.
“Typically, the second and third quarters perform better than the first and fourth quarters, and last year was no different,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “A combination of higher per-loan production expenses and lower secondary marketing income affected quarterly profitability. Firms added approximately 10 percent more employees last quarter, and slowing rate locks towards the end of the year led to less secondary marketing.”
Eighty-four percent of the lenders and servicers surveyed said they were profitable in the fourth quarter.
The average pre-tax production profit was 46 basis points (bps), down from an average net production profit of 74 bps in the third quarter.
Loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $7,525 per loan in the fourth quarter, up from $7,217 per loan in the third quarter.
From the third quarter of 2008 to last quarter, loan production expenses have averaged $6,504 per loan.
Personnel expenses averaged $5,064 per loan in the fourth quarter, up from $4,871 per loan in the third quarter.
Average production volume was $800 million per company up from $781 million in the third quarter.
The volume by count per company averaged 2,947 loans, up from 2,880 the previous quarter.