Profits deteriorated at independent mortgage shops as production was pared and employee expense increased. Although new business has declined by more than a quarter over the past year, staffing levels have risen by nearly a fifth.
Surveyed independent mortgage bankers originated an average 1,655 loans for $360 million during the fourth quarter of last year.
Business was down from three months earlier, when those same lenders generated an average of 1,975 loan closings for $434 million.
On a dollar volume basis, business retreated 26 percent from the fourth-quarter 2012.
The findings were outlined in the Quarterly Mortgage Bankers Performance Report Q4 2013 from the Mortgage Bankers Association. There were 299 companies that participated in the production portion of the survey.
The average sales employee closed 5.2 loans, fewer than the 6.9 average from the previous three-month period and 11.1 average in the same three-month period during 2012.
Average loan origination fees were 56 basis points, slightly better than the prior period’s 55 BPS and an improvement from the year-earlier period’s 49 BPS.
However, for companies that originated less than $50 million in loans during the fourth quarter, average origination fees jumped to 81 BPS, while it plummeted to 26 BPS at firms that generate more than $1 billion in business.
Human resource expense climbed to 209 BPS from the third quarter’s 191 BPS. Deterioration was even more pronounced compared to the fourth-quarter 2012, when the expense was just 162 BPS.
This category reflected an average 283 employees on staff as of the end of last year, including 118 sales employees, 109 fulfillment employees and 56 other production-related employees. Total headcount expanded from an average of 279 in the prior report and 237 in the year-earlier report — when production was higher.
Total net production income slid to 9 BPS from 41 BPS in the previous period and plummeted 92 percent from the fourth-quarter 2012.
Net production income jumped to 18 BPS for firms that originated between $250 million and $1 billion per quarter.
Based on the origination channel, retail-only originators earned 20 BPS, while the net was only 8 BPS for companies that generated at least three-quarters of their business through the wholesale channel.
Mortgage bankers earned 6 BPS on the spread between warehouse income and warehouse expense, an improvement over 4 BPS in the third quarter and just 1 basis point during the final three months of 2012.
Secondary marketing income inched up to 245 BPS from the third quarter’s 242 BPS but retreated from 279 BPS in the same quarter during the prior year.
