Independent mortgage banks saw production profits slip during the fourth quarter, a result in part of the implementation of the TILA-RESPA Integrated Disclosures, according to the Mortgage Bankers Association.
The MBA reported in its Quarterly Mortgage Bankers Performance Report that independent mortgage banks and mortgage subsidiaries of chartered banks raked in a net gain of $493 on each loan they originated during the fourth quarter. The net gain dropped 60% from the third quarter, when it averaged $1,238 per loan.
The pre-tax production profit came in at 22 basis points in the fourth quarter, versus the average of 55 basis points the quarter prior. Since the MBA began the report in the third quarter of 2008, net production income has averaged 53 basis points.
“The fourth quarter marked the second-highest level of production expenses per loan since the inception of our report in the third quarter of 2008,” MBA vice president of industry analysis Marina Walsh said in a news release Thursday. “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.”
Consequently, Walsh noted the increase in volume during the fourth quarter does not explain alone the higher expenses mortgage bankers experienced. Expenses for the fourth quarter rose to $7,747 per loan, from $7,080 in the third quarter. Personnel expenses similarly increased, rising to $5,131 per loan from $4,674 per loan in the third quarter.
Altogether, the percentage of firms posting pre-tax net profits for all business lines dropped. In the fourth quarter, 72% of firms in the study posted such a profit, whereas 86% had in the third quarter.
Average production volume also dropped quarter-to-quarter — falling to $538 million in the fourth quarter from $614 million in the third quarter. Similarly, volume by count per company declined to an average of 2,265 loans in the fourth quarter, from 2,609 in the third quarter.
