Mortgage bankers saw their per-loan profits plunge last year, and the deterioration likely continued into the first quarter of this year. Servicers fared better.
Mortgage lenders earned an average profit of $1,242 per loan originated during 2013, tumbling from $2,199 in average profit per loan the previous year.
Last year’s mortgage production profits worked out to 61 basis points versus the 108 BPS earned on residential loans during 2012.
The statistics were reported Thursday by the Mortgage Bankers Association in its Annual Mortgage Bankers Performance Report. The findings were based on a survey of 242 independent mortgage bankers and mortgage subsidiaries of chartered banks.
The year-over-year decline was in line with industry-wide origination volume, which fell to around $1.864 trillion in 2013 from $2.106 trillion in 2012 based on an average of estimates from MBA, Fannie Mae and Freddie Mac.
Despite the sizeable year-over-year decline, last year’s profits still represented the second highest on record since MBA’s performance report was initiated in 2008.
But within 2013, production profit varied widely between the first and second half of the year.
First-half net production income was 80 BPS — far more than the 27 BPS earned per loan during the second half.
First-half originations were around $1.088 trillion, while second-half production was approximately $0.767 trillion.
Zeroing in on quarterly activity, net production income plummeted to 9 BPS in the fourth quarter from 41 BPS in the third quarter, according to previous data from MBA. During the same period, mortgage originations fell to $0.334 trillion from $0.434 trillion.
Given that home loan originations slid even further in the first quarter of this year — to roughly $0.254 trillion — further deterioration can be expected.
However, once lenders have fully implemented cost-cutting measures that bring their fixed costs in line with current production levels, per-loan profits are likely to rise again.
MBA said that total loan production expenses were $5,948 per loan in 2013, climbing from $5,137 the prior year.
The report indicated that 2.6 loans were originated monthly per production employee, fewer than the 3.7 average in 2012.
The metrics were more positive for mortgage servicers, which pushed up per-loan net servicing income to $257 in 2013 from just $27 a year earlier.
Net servicing income worked out to 14 BPS last year and 3 BPS in 2012.
“Including all business lines, 91 percent of the firms in the study posted pre-tax net financial profits in 2013, down from 97 percent in 2012,” MBA stated.
