77% of the 347 mortgage lenders responding to the recent Mortgage Bankers Performance Survey reported a pre-tax profit in third quarter of 2017. Not too bad, but this is down from the 86% reporting a profit for the 2nd quarter. Not so good for the other 23%?
For comparison purposes, those responding reported a net gain of $929 per loan originated in the 3rd quarter. This was down from the $1,122 earned per loan in quarter #2.
On the bright side, both these numbers are way up from the dismal $224 in income reported for the first quarter of 2017.
The higher net profits are due somewhat to lower rates and increased loan sizes. Problem is that loan production expenses grew in the 3rd quarter to $8,060 per loan, up from $7,774 in the prior quarter.
Third quarter production expenses were the second highest ever reported since the survey began back in 2008.
The big number, personnel expenses, averaged about $5,280 per loan. Up from an average of $5,120 per loan from previous quarters.
In the third quarter, productivity decreased to 2.1 loans originated per production employee per month, down from 2.5 loans per person in the Q2. Fewer loans are done with the same number of people.
The increase in profit per loan over the first quarter of 2017 shows that some lenders have made adjustments in their operations, staff, and business models.
To maintain these profits, it may be necessary to do more in 2018. Based on most reports, we’re moving into a purchase market, with a shortage of homes for sale, at higher prices. That translates into higher loan balance but fewer opportunities for loans.
You need to find ways to produce more business with fewer people and reduced operational expense.
Technology is the key to staying competitive increasing efficiency, reducing expenses and improving the customer experience. Such things as:
- Online, real-time applications and approvals
- Automated product and pricing engines
- Electronic verifications
- Document imaging and storage
- Rules-based systems for pre and post-close audits and HMDA reporting
Technology that will help you improve efficiencies while improving quality and compliance. This is critical as with streamlined, electronic applications, approvals, and closings comes the necessity to quickly identify potential problems, loan defects, and operational deficiencies.
Things will happen more quickly and you need the capabilities to react and respond accordingly.
Look to minimize your staff by providing the people that you need with the tools they need to become more productive. This will reduce the biggest number negatively affecting your income per loan. That will increase your profits.
Technology is your key to opening doors to more loans, better quality and compliance, reduced expense, and improved income. LoanLogics can help.