An escalation in prepayment volume pushed up quarterly losses from mortgage servicing rights activity and drove earnings at the mortgage servicers deeper into the red.
Residential loan servicers lost an average of over 8 basis points on each loan that they serviced during the period that started on April 1, 2016, and concluded on June 30.
Average earnings deteriorated compared to the first quarter, when losses amounted to less than 6 BPS, and swung from an 11-basis-point profit in the second-quarter 2015.
The Mortgage Bankers Association detailed the servicing data, along with a multitude of other statistics, in its Quarterly Mortgage Bankers Performance Report Q2 2016.
MBA charges
$675 to its members for a quarterly subscription to the report, while non-members pay $1,125.
Although
240 independent mortgage banks and mortgage subsidiaries of chartered banks participated in the most-recent servicing survey, just the 215 that were part of both the first-quarter and second-quarter 2016 surveys were reflected in the quarter-over-quarter comparisons.
Second-quarter 2016 losses were greatest at companies that serviced more than 50,000 loans: 13 BPS. But at firms with servicing portfolios of between 2,500 loans and 10,000 loans, losses were just 3 BPS.
The deterioration between the first and second quarters of this year among all servicers was primarily the result of mortgage servicing rights, with total
MSR financial items widening nearly 2 BPS from the first quarter to more than a negative 20 BPS. This category was a loss of just 1 basis point in the second-quarter 2015.
“With elevated prepayment activity, we continued to see hits to servicing profitability resulting from mortgage servicing right markdowns and amortization,” MBA Vice President of Industry Analysis Marina Walsh explained in a news release.
Personnel expenses were 6 BPS in the latest period.
The average servicing portfolio
among survey participants inched up to 72,491 loans for $12.017 billion from 72,033 loans for $11.823 billion as of March 31, 2016.
But the portfolio size has diminished from mid-2015, when the average was
73,936 mortgages serviced for $12.487 billion.
Efficiency deteriorated among independent mortgage servicers, with 1,175 average loans serviced per full-time employee in the second-quarter 2016 versus 1,245 three months earlier and 1,176 one year earlier.
Companies that serviced fewer than 2,500 had the lowest efficiency, with just 647 loans serviced per full-time employee during the most-recent period. But the highest efficiency was at organizations that serviced between 10,000 and 50,000 loans, where the average was 1,592.
