Rising operating expenses during the fourth quarter of 2014 saw independent mortgage bankers' pretax profits fall by 28.4 basis points compared to the third quarter of 2014, according to accounting firm Richey May’s quarterly trend report.
The increase in operating expenses reversed three consecutive quarters where they declined, the report found. For 2014 overall, expenses averaged $1,873 per loan among the more than 40 independent mortgage companies surveyed by the report, according to a March 31 news release.
The results compare with a similar study
"With production volume and margins both up during the fourth quarter, the increase in operating expenses on a per-loan basis is less an indication of overcapacity and more a result of lenders making needed investments in technology and infrastructure," Kenneth Richey, managing partner of Richey May, said in a press release. “Expenditures like these typically precede any increase in production by at least a quarter.”
The report further found that total production increased 3.9% over the third quarter while refinance volume soared 28.4% due to falling interest rates. Gross loan margins also rose by just over 4 basis points, and purchase volume decreased by 6%.
