Independent mortgage bankers continued to lose money on every loan origination, making that eight consecutive quarters of losses, and
But some of the damage to origination loan profitability is self-inflicted, a report from Intercontinental Exchange found.
The first quarter net loss of $645 per loan is the smallest since the
"In basis points, production revenue rose above the historical average and production costs declined," Marina Walsh, vice president of industry analysis, said in a press release. "This led to an improvement in the production bottom line by almost 50 basis points during the quarter."
The average pretax production loss was 25 basis points in the first quarter, compared with a loss of 73 basis points in the fourth quarter, and a loss of 68 basis points one year ago.
Production revenue, including fee income, secondary marketing income and warehouse spread, was 371 basis points, up from 334 basis points one quarter ago and the historical average since the MBA has performed this study of 347 basis points.
In dollar terms, production revenues increased to $11,947 per loan in the first quarter, up from $10,376 in the fourth quarter.
Total loan production expenses in the first quarter averaged 395 basis points versus 407 basis points in the fourth quarter. However, per-loan costs increased to $12,593 per loan from $12,485. Costs remain much higher than the historical average of $7,472 per loan.
ICE cited earlier editions of the MBA report in its whitepaper. Making
The data was crunched by ICE Fee Solutions,
A review of nearly 90,000 mortgages found lenders paid an average of $1,225 per loan on fee cures and related expenses.
"Every basis point counts," said Tim Bowler, president of ICE Mortgage Technology, in a press release. "Unfortunately, fee cures and the costs associated with them — entirely preventable expenses — are contributing to the already ballooning cost to originate a mortgage."
The whitepaper noted that
A CFPB loan officer survey also cited in the paper found that 31% of respondents said the CD was an almost always accurate representation of final loan terms and costs, while 47% said that was the case often or sometimes and 16% commented it was rarely or never.
The study found that fee cures occurred on 35% of mortgages on average. That direct cost of making reimbursements was an average of $128.50 per loan; the total cost for tolerance violations was over $4 million. But lenders also had to absorb the costs of the labor associated with a fee cure review and document processing. That amounted to an average of $1,096.50 per loan.
Some fees have zero tolerance for variation between the loan estimate and closing disclosure, others allow for a 10% change from the LE.
For the zero tolerance category, the fee type which was the costliest for an error was for the payment of discount points; this was 47.5% of fee cure expenditures. The No. 2 type, the credit report fee, was 15.6%.
The MBA also found that servicing net financial income for the first quarter was $82 per loan, up from a loss of $24 in the fourth quarter and income of $54 one year earlier.
Servicing operating income, which excludes mortgage servicing rights amortization as well as gains and loss in the valuation of servicing rights net of any hedging results, and any income or losses on the bulk sale of MSRs, was $93 per loan in the period, down from $108 three months prior and $102 for the first quarter of 2023.
