Average origination fees dropped in the fourth quarter, while production expenses were higher, according to a new industry study. Partially offsetting the lower net was higher production volume. Mortgage bankers had a wider profit margin on wholesale business than on retail originations, and the largest lenders had the smallest origination fees.
The average mortgage banking firm originated 2,132 loans for $488 million during the fourth-quarter 2012.
Business was better than the third quarter, when residential lenders originated an average of 2,010 mortgages for $450 million.
In the final three months of 2011, the average was 1,431 loans funded for $313 million.
The findings were included in the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report Q4 2012. The 73-page PDF report is priced at $350 for MBA members and $600 for non-members.
The report reflects responses from 325 small and medium-sized independent mortgage companies and subsidiaries, including 312 that reported production numbers and 193 that reported servicing data.
Comparing only the 288 companies that participated in both the third and fourth quarter surveys, the average production climbed to 2,237 loans for $512 million from the third quarter’s 2,070 units closed for $466 million.
Average loans closed per production employees were 3.84 a month, not as good as the 3.93 monthly average three months earlier but better than 3.46 in the year-earlier quarter.
The average sales employee closed 11.1 loans, a little better than the 11.0 average in the previous quarter and much better than the 9.8 average in the fourth-quarter 2011.
Total net production income during the most-recent three-month period was 107 basis points per loan, less than the 120 BPS in the prior period but nearly double the 58 BPS earned on each loan in the fourth-quarter 2011.
“Historically, production costs have dropped with rising volume,” MBA Associate Vice President of Industry Analysis Marina Walsh said in the report. “In this quarter, however, despite high origination volumes, per-loan costs reached the highest levels we have seen in this study, other than during the first half of 2011, when origination volume was 60 percent lower.”
On the retail side, net production income was 108 BPS, while it jumped to 118 BPS for companies that generate at least three quarters of their overall production from the wholesale channel.
Net production income in the fourth quarter was worst for firms that originated between $100 million and $250 million during the fourth quarter: 98 BPS. Mortgage bankers with production in excess of $1 billion earned 124 BPS.
The latest net production income reflected average loan origination fees of 49 BPS. Originators earned less than the 56 BPS three months earlier and 57 BPS a year earlier. Lenders with less than $50 million in originations had average origination fees of 68 BPS, while it dropped to 25 BPS for firms with more than $1 billion in originations.
There was 279 BPS in net secondary marketing income, 1 basis point in net interest income and a negative 173 BPS in net loan production operating income.
An average of 162 BPS went to personnel expenses, more than the 153 BPS for this category in the third quarter and the 158 BPS in the fourth-quarter 2011.
With 17.9 BPS in warehousing income and 16.7 BPS in warehousing expenses during the fourth quarter, net interest income worked out to 1.2 BPS, off from 1.4 BPS. Net interest income was much stronger a year prior at 3.0 BPS.
Firms that originated between $50 million had $100 million seemed to have a knack for maximizing warehouse income, earning 2.4 BPS — more than any other size group. Lenders closing between $100 million and $250 million had the worst luck in this category with an 0.2-basis-point loss.
Average headcount was 237 as of the most-recent date, more than the average staff of 222 in the third quarter. The average number of employees has ballooned from 185 in the final quarter of 2011.
Sales employees accounted for 97 of the year-end 2012 total, while there were an average of 88 fulfillment employees and 52 other production-related employees.
