Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,242 on each loan they originated in 2013, down from $2,199 per loan in 2012, the Mortgage Bankers Association (MBA) reported in its Annual Mortgage Bankers Performance Report.
“Full-year 2013 net production profits were respectable,” said Marina Walsh, MBA’s vice president of industry analysis. “In fact, they were the second highest recorded since inception of the Performance Report in 2008. However, net production profits in the second half of 2013 were substantially lower than those in the first half of 2013. While secondary marketing gains remained relatively strong throughout the year, per-loan production expenses escalated in the second half of 2013.”
Among the other key findings of MBA’s Annual Mortgage Bankers Performance Report are:
►In basis points, the average production profit (net production income) was 61 basis points in 2013, compared to 108 basis points in 2012. In the first half of 2013, net production income averaged 80 basis points, then dropped to 27 basis points in the second half of 2013.
►Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $5,948 per loan in 2013, up from $5,137 in 2012. In the first half of 2013, total production expenses averaged $5,743 per loan, then rose to $6,539 per loan in the second half of 2013.
►Personnel expenses averaged $3,910 per loan in 2013, up from $3,285 per loan in 2012.
►The "net cost to originate" was $4,298 per loan in 2013, up from $3,323 in 2012. The "net cost to originate" includes all production operating expenses and commissions, minus all fee income, but excluding secondary marketing gains, capitalized servicing, servicing released premiums, and warehouse interest spread.
►Productivity was 2.6 loans originated per production employee per month in 2013, down from 3.7 in 2012.
►Secondary marketing income declined slightly to 254 basis points in 2013, from 260 basis points in 2012.
►Average production volume was $1.75 billion (7,857 loans) per company in 2013, compared to $1.72 billion (7,699 loans) per company in 2012. On a repeater company basis, average production volume was flat at $1.81 billion (8,083 loans in 2013 and 8,098 loans in 2012).
►The purchase share of total originations, by dollar volume, increased to 57 percent in 2013, up from 44 percent in 2012. For the mortgage industry as a whole, MBA estimates the purchase share at 37 percent in 2013, up from 29 percent in 2012.
►For those companies in mortgage servicing, net servicing income per loan increased to $257 per loan in 2013, from $27 per loan in 2012. In basis points, the average servicing profit was 14 basis points in 2013, compared to 3 basis points 2012.
►Including all business lines, 91 percent of the firms in the study posted pre-tax net financial profits in 2013, down from 97 percent in 2012. In the first half of 2013, 95 percent of reporting firms posted pre-tax financial profits, compared to 69 percent in the second half of 2013.