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Report: Independent Mortgage Bankers See 18 Percent Decrease in Loan Production


June 26 - According to the 2014 Trend Report for Independent Mortgage Bankers, loan production among independent mortgage bankers continued to decline in the first quarter of 2014, falling 18 percent since the fourth quarter of 2013. Purchase volume decreased for the third consecutive quarter, dropping 13.7 percent. Margins increased by 28 basis points – the result of an 11-basis point decrease in origination fees, and a 39-basis point increase in secondary gains.

“Independent mortgage bankers are taking less in origination fees, but are making more from gains on sale into the secondary market,” said Kenneth Richey, managing partner of Richey May, a mortgage  business advisory firm that conducted the report.

“This suggests that lenders are responding to the QM fee cap,” he said, speaking of the Qualified Mortgage rules that impose a 3 percent limit on the amount a lender can charge in origination fees. “Rather than earning on the front end, they’re increasing margins on the secondary sale.”  

Each quarter, Richey May uses Richey May Select, the industry’s only benchmarking technology specifically for independent mortgage bankers, to analyze data submitted by independent mortgage bankers across the U.S., and compile a report of the quarter’s outstanding trends. The report highlights key performance indicators, such as overall volume and volume by transaction type, margins, operating costs, labor output, and more. The data used in the report includes much of the same information that its confidential lender participants provide to the GSEs each quarter via the Mortgage Bankers’ Financial Reporting Form.

Additional findings in the first quarter 2014 trend report include the following: 

Servicing revenue contributed 12 basis points to survey participants’ bottom lines during the 1st quarter of 2014, up from six basis points for the 4th quarter of 2013. The majority of servicing revenues resulted from bulk sales of servicing portfolios, which accounted for 83% of all net servicing revenues.

Despite continued rising costs, Richey May Select survey participants achieved nearly break-even pre-tax profits for the 1st quarter of 2014, showing a 25-basis point improvement over the previous quarter. Lenders generally compensated for heightened operating and personnel costs by increasing loan margins.

“Lenders are pin-pointing the most effective ways to compensate for lower production levels,” said Richey. “Servicing is playing a major role in increasing revenue, and streamlining operations and reducing personnel is one of the major ways they’re cutting costs. If an independent mortgage banker is struggling significantly and isn’t taking the same approach regarding servicing, operations and personnel, it really should look to what its peers are doing to successfully cope with today’s market conditions.”

Richey May quarterly trend reports are provided free of charge to all Richey May Select subscribers. Richey May Select benchmarking technology provides quick, easy access to current peer-to-peer benchmarking information on various aspects of their financial, production, employment, warehousing and servicing operations. Unlike static benchmarking reports, with Richey May Select, all information is current and available roughly six weeks after the end of each quarter.

Richey May also issues an annual salary report. Independent mortgage bankers interested in providing confidential information used in Richey May Select’s analysis may contact Trevor Reinhart at