MBA: Mortgage Revenues Increased In 2016, But So Did The Cost To Originate
The average profit per mortgage originated increased to $1,346 in 2016 – up from $1,189 in 2015, according to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report, which is based on data reported by independent mortgage bankers.
What’s more, the average loan balance reached a study high of $244,945 for first mortgages – up from $242,480 in 2015. It was the seventh consecutive year of rising loan balances on first mortgages.
This translated into higher revenues, which also reached a study high of $8,555 per loan in 2016.
At the same time, production expenses reached a study high of $7,209 per loan, offsetting the increase in revenue. Total loan production expenses – commissions, compensation, occupancy, equipment, and other expenses and corporate allocations – increased to $7,209 per loan, up from $7,046 in 2015.
Personnel expenses averaged $4,801 per loan in 2016, which is up from $4,699 per loan in 2015.
All together, lenders originated 11,161 loans, or nearly $2.7 billion per company, in 2016 compared with 9,906 loans, or about $2.4 billion per company, in 2015.
For the mortgage industry as a whole, the MBA estimates that production volume reached $1.89 trillion in 2016 – up from $1.68 trillion in 2015.
The report, which was released in April, also shows that mortgage lenders with servicing portfolios experienced significant fluctuations in the valuation of their mortgage servicing rights related to corresponding interest rate fluctuations during 2016.
“Most servicers reported net servicing financial losses in the first half of the year, followed by recoveries by the end of the year,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “Including both production and servicing operations, 94 percent of the firms in the study posted overall pre-tax net financial profits in 2016, from 92 percent in 2015.”
Flagstar To Acquire Opes Advisors’ Mortgage Banking Business
Flagstar Bancorp recently acquired the mortgage banking business of Opes Advisors Inc. Terms of the deal, which closed in May, were not disclosed.
Opes Advisors has 39 retail locations in California, Oregon and Washington. Most of these locations are in wealthy areas, resulting in high credit quality originations.
In 2016, Opes’ 160 mortgage advisors closed approximately $3 billion in originations – mostly purchases.
The company also has a wealth advisory arm that currently has approximately $325 million in assets under management.
Flagstar will operate Opes Advisors as a separate division with its own brand, providing a strategic expansion to Flagstar’s retail home lending franchise, Flagstar says in a release.
Alessandro P. DiNello, president and CEO of Flagstar, says the acquisition fits in the bank’s strategic goal of growing its retail mortgage business. In addition, it is a “good fit culturally,” he says.
“We like the deep mortgage experience of their management team; we like their strong purchase mortgage origination focus; and we like their long track record of success,” DiNello says. “We look forward to working with the entire Opes Advisors team to share best practices and create a first-class borrowing experience for our customers.”
The deal follows Flagstar’s acquisition of the residential mortgage delegated correspondent lending platform of Stearns Lending LLC, along with certain related assets, in late February.
Survey: About 9% Of Mortgages In 2016 Were Non-QM Loans
Non-qualified mortgage (non-QM) loans represented about 9% of total originations in 2016 – down from 14% in 2015, according to a survey recently conducted by the American Bankers Association (ABA).
The survey further reveals that more than 30% of banks are restricting lending to QM segments only, and 45% are making non-QM loans only to targeted markets or with other restrictions.
High debt-to-income levels, in addition to insufficient documentation, continue to be the most common factors prohibiting mortgage loans from meeting QM standards, the survey finds.
“Non-qualified mortgage loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers,” says Robert Davis, executive vice president of the ABA, in a statement. “Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time home buyers into the market.”
Despite the regulatory challenges, banks have managed to show positive trends in loan production. For example, 16% of single-family mortgages went to first-time home buyers in 2016 – up from 15% in 2015 to reach a survey high.
Foreclosure rates, meanwhile, dropped more than a quarter percent to 0.37%, down from 0.63% in 2015.
According to the survey, heightened regulation remains a major concern for bankers, followed by rising interest rates, compliance requirements under the TILA-RESPA Integrated Disclosures rule, and insufficient inventory in the housing market.
MBA: Mortgage Credit Availability Decreased Slightly In April
After increasing 3.2% in March, mortgage credit availability decreased 0.2% in April, falling to a score of 183.0 on the Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI).
The March index score was 183.4, and the February score was 177.8.
The index, which was benchmarked to 100 in March 2012, uses data from Ellie Mae’s AllRegs Market Clarity business information tool to arrive at its estimates. A decrease in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.
Looking at the four component indices, credit availability for conforming loans decreased 0.9%; credit availability for conventional loans decreased 0.6%; credit availability for jumbo loans decreased 0.4%; and credit availability for government loans remained unchanged compared with the previous month.
“After some program changes early in the year and some merger activity among investors, credit availability held fairly steady in April, with little discernible change in the composition of the supply of credit for government and jumbo programs,” says Lynn Fisher, vice president of research and economics for the MBA, in a release. “Conforming credit availability has slipped a bit since the beginning of the year, with fewer program offerings along a range of credit characteristics and no particular culprit.”
Average Number Of Days To Close A Mortgage Fell Again In March
Refinances fell to 37% of all loans flowing through Ellie Mae’s Encompass loan origination system in March, the mortgage software firm reports in its Origination Insight Report.
It was the lowest refinance share since July 2016, according to the firm’s data.
The average number of days to close a mortgage for all loan types was 43 days, down from 46 days in February to reach the shortest time to close since February 2015. It was the third month straight that the average number of days to close fell.
The average time to close a refinance loan was 43 days, down from 47 days the month prior. The average time to close a purchase loan was also 43 days, down from 45 days.
The closing rate in March, as per Ellie Mae’s data, was 67.9%, down from 70.6% in February. The closing rate on refinances was about 64.4%, and the closing rate on purchases was about 74.8%.
The average FICO score for all closed loans was 721, up slightly from 720 in February. About 68% of all closed loans had FICO scores over 700.
About 71% of purchase loans had FICO scores over 700. About 66% of refinances had FICO scores over 700.
Land Home Financial Services Completes First E-Closing
Mortgage lender Land Home Financial Services Inc., in collaboration with MERSCORP Holding Inc. (MERS) and Fannie Mae, recently completed its first e-closing via its retail origination channel.
The lender reports that it has been working toward a compliant, next-generation digital mortgage solution for about the past year. This completely electronic closing process involved the use of an e-note.
“Offering e-closing has long been a goal at Land Home, as it unifies the needs and desires of our clients with the regulatory ambition of the Consumer Financial Protection Bureau,” says Brad Waite, president and CEO of Land Home, in a release.
Many lenders are now adopting e-mortgage technology in order to meet the needs of millennials, who are almost entirely using online and mobile technology to shop for homes and apply for mortgages. The goal is to create a more simplified and seamless mortgage experience – from application through closing – that takes less time and involves far less paper.
Land Home also worked with PeirsonPatterson LLP, a Dallas-based financial services compliance and technology firm; FirstFunding Inc., a Dallas-based privately held non-depository (non-bank) financial services company; and Placer Title Co./National Closing Solutions to process, update and secure its first e-closing.
“This is just one of many steps we are taking to improve the customer experience and drive efficient, on-time closings to support our community-based branches and real estate partners across the nation,” says Brenda Usher, chief operating officer for Land Home.
“The demand for speed and certainty, coupled with an increased focus on compliance, is fueling an increasing demand for digital e-mortgages,” adds Michael Cafferky, product development manager for Fannie Mae. “We are eager to continue support of our customers like Land Home in driving their business forward with innovative mortgage solutions.”
The MERS e-registry is the system of record that identifies who is in control of the e-note.
“The model Land Home Financial Services and First Funding are using to register e-notes on the MERS e-registry is a truly collaborative effort,” says Katie Paolangeli, vice president of e-commerce and industry initiatives with MERS. “FirstFunding does the registrations on Land Home’s behalf, which is a model we believe could work well for many other companies and their trading partners. This was an integration effort that really came together to create value for all parties.”
Established in 1988 and headquartered in Concord, Calif., Land Home has more than 80 branch office locations across the nation and continues to expand into local communities.