Magazine article Mortgage Banking

Origination Profits Plummet in Fourth-Quarter 2013

Magazine article Mortgage Banking

Origination Profits Plummet in Fourth-Quarter 2013

Article excerpt

The Mortgage Bankers Association (MBA) reported that during the fourth quarter of 2013, average production profits took a nosedive to just $150 per loan. That was the lowest per-loan profit since the group started publishing its Quarterly Mortgage Bankers Performance Report in 2008.

MBA said it was the fifth consecutive quarter that production profits have declined. The fourth-quarter per-loan profit of $150 was down from $743 per loan in the third quarter of last year.

The average production profit in basis points was 9 basis points in the fourth quarter. That was down from 38 basis points in the third quarter of 2013.

MBA reported that including all business lines (including servicing), just 58 percent of firms in the study posted pre-tax net financial profits in the fourth quarter. That was down from 74 percent in the third quarter and 92 percent in the second quarter.

Production costs were a key factor in the weak results for origination profits. Total loan production expenses increased to $6,959 per loan in the fourth quarter. MBA said that was the highest recorded in a quarter since the Performance Report was created in the third quarter of 2008. These costs include commissions, compensation, occupancy, equipment and other production expenses as well as corporate allocations.

Average production per reporting company dropped in the fourth quarter to $367 million, down from $391 million in the third quarter.

The report is based on a quarterly survey of independent mortgage banks and mortgage subsidiaries of chartered banks. …

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