There are signs of pricing pressure as per-loan production costs continue to rise, said Marina Walsh, MBA’s associate vice president of industry analysis.
Servicing costs followed that same trend as total direct expenses increased to $227 per loan up from $233 in the previous quarter and $200 in the second quarter of 2012.
Nonetheless higher direct servicing revenues at $466 per loan, up from $456 and $455 in 1Q13 and 2Q12 compensated the increase bringing in a direct servicing net income of $239 per loan, up from $233 in 1Q13 but lower than the $256 average direct servicing income reported in the second quarter of 2012.
The average servicing portfolio for the 208 companies reporting data to the MBA was $11,070,394,000, while the average loan under servicing was $173,882.
Loan costs increased across the board for both servicers and originators. Independent banks and their subsidiaries reported loan profits of $1,528, down from $1,772 on loans originated in the first quarter.
At the same time total loan production expenses that include commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations increased to $5,818 per loan, up from $5,779 in the first quarter.
And roughly two-thirds of those expenses were personnel expenses which averaged $3,808 per loan in the second quarter, up from $3,785 in the previous quarter.
Among others, regulatory requirements that demand high touch customer centric loan origination and servicing processes have led to an overall quarterly increase of the average number of production employees per firm to 261 employees, up from 251 in the first quarter.
The average number of production employees per firm increased even more on a repeater company basis from 251 to 271 employees, while productivity, at least in originations, declined to 2.9 loans originated per production employee per month from 3.1 in the first quarter.
These costs increased the "net cost to originate” from $4,182 per loan to $4,207 in the second quarter.
These costs however include “all production operating expenses and commissions minus all fee income,” excluding secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
Data show higher costs are affecting all aspects of mortgage banking. For example, Walsh said, cost pressures also caused the reduction in secondary marketing income, which declined to 263 basis points in the second quarter from 274 basis points in the first quarter.
Income however is also affected by “a shift in product mix towards purchase originations,” Walsh said, while the overall volume remained flat.