As quarterly home-lending volume escalated, mortgage banking organizations were able to lower their per-loan production expense and boost their per-loan profits.
Independent mortgage bankers and mortgage subsidiaries of chartered banks originated an average of 3,016 loans for $0.739 billion during the three months ended Sept. 30.
Mortgage production accelerated compared to the previous three-month period, when an average of 2,680 residential loans were funded for a total of $0.646 billion.
Activity also increased from the same period last year, when home lending activity averaged 2,609 loans for $0.614 billion.
Those details and more were included in the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report Q3 2016. The full report can be accessed by MBA members for a $675 quarterly subscription fee, while the cost is $1,125 for non-members.
A total of 345 mortgage origination firms participated in the survey, though quarter-over-quarter comparisons reflect data from just the 320 entities that participated in both the second- and third-quarter surveys.
The latest period saw 8.2 loans originated per month per sales employee. The average improved from 7.4 loans in the second quarter and 6.6 loans in the third-quarter 2015.
The average survey participant reported 385 full-time employees. Staffing grew from 350 people in the prior period and 325 employees a year prior.
Net production income increased to 78 basis points in the third-quarter 2016 from
73 BPS three months earlier and 55 BPS one year earlier.
Average loan origination fees jumped to 46 BPS from 41 BPS in the second quarter of this year and 40 BPS in the third quarter of last year.
Third-quarter 2016 origination fees were highest at lenders that closed between $0.050 billion and $0.100 billion: 66 BPS. Firms that originated more than $0.250 billion had the lowest average: 32 BPS.
Retail-only lenders earned an average origination fee of 51 BPS in the most-recent period, while the average was 44 BPS at companies with both retail and wholesale businesses. Mortgage bankers that generate at least three-quarters of their business through the wholesale channel earned average origination fees of 13 BPS.
Net interest income, which is derived from loans on the warehouse line, fell to 2 BPS form 4 BPS in the second quarter. The decline came even as average time on the warehouse line expanded one day from the second quarter to 19 days. Time on the warehouse line was the same as one year prior.
Also down was secondary marketing income — to 297 BPS in the third quarter from 304 BPS.
This was driven by a decline in capitalized servicing/servicing-released premiums, which fell to 91 BPS from 101 BPS.
Net income was boosted by lower production expense, which was cut to 291 BPS from 299 BPS in the
second quarter and 306 BPS in the same period last year.
“For the first time since the second quarter of 2015, production expenses were below $7,000 per loan, at $6,969 per loan,” MBA Vice President of Industry Analysis Marina Walsh stated in an accompanying news release. “However, these expenses remain elevated by historical standards. Given the increase in loan count and the higher pull-through rate compared to the second quarter, we would have expected an even larger reduction in production expenses.”
Helping to reduce production expenses was personnel expense, with that category dropping to 195 BPS from 200 BPS. One year prior, personnel expense was 201 BPS.
