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Origination profits down in third quarter.

Even though residential origination volume remained solid in the third quarter of 2015--and up considerably from third quarter 2014--net profit per loan slipped to $1,238 in the third quarter, according to the Mortgage Bankers Association's (MBA's) Quarterly Mortgage Bankers Performance Report. That profit number was down from $1,522 per loan in the second quarter of 2014.

Despite the fact per-loan profit slipped on a quarterly basis, profit climbed in the third quarter of 2015 compared with per-loan profit of just $897 in the third quarter of 2014.

MBA reported that average residential production volume for survey participants in last year's third quarter was $614 million per company. That was up notably from just $437 million per company in the third quarter of 2014. However, average production volume was down from the second quarter, when it reached a study high of $657 million per company. (The performance report was first published in the third quarter of 2008.)

The third-quarter 2015 results showed volume per company on a loan-count basis averaged 2,609 loans compared with the study-high 2,714 loans in the second quarter of 2015.

The survey found that the purchase share of originations in the third quarter of 2015 was 70 percent. That was a jump from 62 percent in the second quarter of 2015, MBA reported.

Total loan production expenses rose to $7,080 per loan in the third quarter of last year. That number includes commissions, compensation, occupancy, equipment and other corporate allocations. Total production expense in the second quarter was $6,984 per loan.

The net cost to originate was $5,549 per loan in last year's third quarter. That was up from $5,372 in the second quarter of 2015.

The MBA study found that the average loan balance in the third quarter was down from the second quarter. In the third quarter, the average loan balance for first mortgages was $241,942--down from $244,350 in the second quarter. The jumbo share of total first-mortgage volume for respondents by dollar volume was 9.09 percent in the third quarter. That was up slightly from 9.07 percent in the prior quarter.

MBA found that when including all business lines, fewer firms reported pretax net financial profits in the third quarter. In the second quarter of 2015, the number reporting financial profits was 92 percent--in the third quarter that dropped to 86 percent.

Significantly, the average pre-tax servicing profit dropped to a loss of $52 per loan serviced in the third quarter. That was a notable deterioration from the per-loan serviced profit of $196 in the second quarter.

Survey respondents include a large share of independent mortgage companies. MBA says that 74 percent of the 363 companies that reported production data for the third quarter were independent mortgage companies. The remaining share of those reporting were bank subsidiaries and other non-depository institutions.

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Title Annotation:NEWS ROOM
Comment:Origination profits down in third quarter.(NEWS ROOM)
Publication:Mortgage Banking
Article Type:Financial report
Geographic Code:1USA
Date:Jan 1, 2016
Words:479
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