First-quarter losses drove originators to reduce expenses
Reducing production expenses allowed independent mortgage banks and mortgage subsidiaries of chartered banks to return to profitability in the second quarter, according to the Quarterly Mortgage Bankers Performance Report released by the Mortgage Bankers Association (MBA).
Originators reported a net gain of $580 on each loan they originated in the second quarter, up from a reported loss of $118 per loan in the first quarter.
MBA found that total production revenue, including fee income, net secondary marking income, and warehouse spread, dropped to 347 basis points in the second quarter, down from 370 bps in the first quarter. Revenues fell to $8,458 per loan in the second quarter from $8,840 per loan in the first quarter.
Commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations totaled $7,877 per loan in the second quarter, down from a study high of $8,957 per loan in the first quarter. MBA noted that loan production expenses have averaged $6,266 per loan for the period from the third quarter of 2008 to the present quarter.
"Mortgage originators evidently responded to first-quarter losses by reducing their expenses in the second quarter, as production expenses dropped by over $1,000 per loan. However, production revenues declined as competition for loans stiffened, negating a portion of these cost-cutting efforts," said Marina Walsh, MBA vice president of industry analysis.
