Mortgage bankers saw their profits take a nosedive in the fourth quarter, partly due to the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID) rules, also known as the “Know Before You Owe” rules, which took effect on Oct. 3, according to data from the Mortgage Bankers Association (MBA).
Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $493 on each loan originated – down more than 60% from $1,238 in the third quarter, the MBA says in its Quarterly Mortgage Bankers Performance Report.
The impact of TRID came in the form of increased operating costs, including additional staffing to deal with the new regulation. Personnel expenses averaged $5,131 per loan in the fourth quarter – up from $4,674 per loan in the third quarter.
In a release, Marina Walsh, vice president of industry analysis for the MBA, says, “With the Know Before You Owe rule going into effect last October … mortgage bankers saw their total loan production expenses climb to [an average of] $7,747 per loan, from $7,080 per loan in the third quarter.”
It was the highest level of expense per loan originated since the third quarter of 2008.
“However, the average production volume per company was nearly double the first quarter of 2014, when production expenses reached a study-high of $8,025 per loan,” Walsh adds. “The increase in total production expenses per loan in the fourth quarter of 2015 cannot be explained solely by volume fluctuations.”
The average pre-tax production profit was 22 basis points (bps) in the fourth quarter, compared with an average net production profit of 55 bps in the third quarter. Since the inception of the performance report in the third quarter of 2008, net production income has averaged 53 bps.
The purchase share of total originations, by dollar volume, was 66% in the fourth quarter of 2015 – down from 70% in the third quarter of 2015. For the mortgage industry as a whole, the purchase share was about 53%.
The jumbo share of total first mortgage originations was 9.34% in the fourth quarter, compared with 9.09% in the third quarter.
The average loan balance was $238,481, up from $238,246 in the third quarter.
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