Independent Mortgage Banks and Subsidiaries Earning Nearly $200 Less Per Loan in Q2

Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,528 on each loan they originated in the second quarter of 2013, down from $1,772 per loan in the first quarter, the Mortgage Bankers Association (MBA) reported. “While overall volume remained relatively flat, we are seeing a shift in product mix towards purchase originations,” said MBA Associate Vice President of Industry Analysis Marina Walsh. “Per-loan production costs continue to rise and there are signs of pricing pressure as evidenced by the reduction in secondary marketing income.” Among the other key findings of MBA’s Quarterly Mortgage Bankers Performance Report are: ►In basis points, the average production profit (net production income) was 75 basis points in the second quarter of 2013, compared to 86 basis points in the first quarter. ►Average production volume was $439 million per company in the second quarter of 2013, from $442 million per company in the first quarter. The volume by count per company averaged 1,921 loans in the second quarter, from 1,954 in the first quarter. ►The purchase share of total originations, by dollar volume, increased to 52 percent in the second quarter of 2013, up from 40 percent in the first quarter. This was the first time the purchase share passed 50 percent since the third quarter of 2011. For the mortgage industry as whole, MBA estimates the purchase share at 36 percent in the second quarter of 2013, up from 26 percent in the first quarter. ►Secondary marketing income declined to 263 basis points in the second quarter, compared to 274 basis points in the first quarter. ►Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $5,818 per loan in the second quarter, from $5,779 in the first quarter. ►Personnel expenses averaged $3,808 per loan in the second quarter, up from $3,785 per loan in the first quarter. ►The "net cost to originate" was $4,207 in the second quarter, up from $4,182 per loan in the first quarter. The "net cost to originate" includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread. ►The average number of production employees per firm rose to 261 employees in the second quarter, from 251 employees in the first quarter. On a repeater company basis, the average number of production employees per firm rose to 271 employees in the second quarter, from 251 employees in the first quarter. ►Productivity was 2.9 loans originated per production employee per month in the second quarter, down from 3.1 in the first quarter. ►Ninety-two percent of the firms in the study posted pre-tax net financial profits in the second quarter of 2013, down from 94 percent of the firms in first quarter.