Falling refinance originations impacted the bottom line at independent mortgage bankers. But some lenders mitigated the impact with their servicing businesses.
Refinance originations during the three months ended Sept. 30 were down 42 percent compared to the second quarter.
The steep decline in refinance production helped pull overall residential originations, including purchases and refinances, down 12.4 percent.
The findings were reported by mortgage service provider Richey May & Co. based on a survey of independent mortgage bankers.
Data previously reported by Mortgage Daily indicate that third-quarter mortgage originations were down nearly 20 percent. Mortgage Daily’s data was based on surveys of independent lenders and publicly reported data from larger lenders.
The Mortgage Daily report said that third-quarter production was down 21 percent from a year earlier.
Richey May reported that 30 percent of borrowers in the third quarter had a FICO score of less than 700. The share was 25 percent in the second quarter.
Mortgage technology provider Ellie Mae previously reported that 28 percent of all borrowers in October had a FICO score that was less than 700 versus just 16 percent in October 2012. .
A 7-basis-point increase from the second quarter in the average value of servicing portfolios was reported by Englewood, Colo.-based Richey May.
A 42-basis-point decline in loan margins pulled net income down by 60 BPS — though the decline was smaller for companies that maintained servicing portfolios.
“Some lenders have sold portions of their servicing portfolios to compensate for decreases in production and profitability,” Richey May Managing Partner Ken Richey said in the report. “Others are incorporating servicing as part of their business models, which can be a good option for lenders that can handle the cash flow constraints that are typical of mortgage servicing.”
