Richey May & Co, a CPA, business advisory and technology company specializing in the mortgage industry, released its fourth quarter 2014 Trend Report for Independent Mortgage Bankers. The Trend Report includes the operating results of more than 40 independent mortgage companies throughout the United States and covers all operating models and production volumes.
According to the report, the fourth quarter of 2014 was representative of the year as a whole, with “decent production and good margins, but minimal pre-tax profits.” During Q4, total production increased 3.9 percent over Q3, gross loan margins were up by 4.3 basis points (bps) and pre-tax profits shrank by 28.4 bps. Purchase volume decreased by a modest 6 percent over the previous quarter and refinance volume increased to 28.4 percent of overall volume due to declining interest rates.
Per-loan operating expenses increased during the fourth quarter after declining over the first three quarters of the year, averaging $1,873 per loan for the full year 2014, causing the dip in profits, noted Kenneth Richey, managing partner of Richey May.
“With production volume and margins both up during the fourth quarter, the increase in operating expenses on a per-loan basis is less an indication of overcapacity and more a result of lenders making needed investments in technology and infrastructure,” Richey said. “Many are increasing their footprints in their markets and expanding to other areas, hiring personnel and recruiting branches. This is an important trend to watch in 2015. Expenditures like these typically precede any increase in production by at least a quarter.”
The Trend Report for Independent Mortgage Bankers was generated from the results of Richey May Select, a benchmarking technology specifically designed for independent mortgage bankers. The software, which provides up-to-date peer-to-peer benchmarking information on various aspects of their businesses — such as financial, production, employment, warehousing and servicing operations — analyzes data submitted by independent mortgage bankers across the U.S. and compiles a report of the quarter’s notable trends. The quarterly benchmarking data highlights key performance indicators, such as overall volume and volume by transaction type, as well as loan margins, operating costs, labor output and more. The data used in the report is gathered from Richey May Select subscribers and is provided at no additional cost to the participants. All data sources are kept confidential.
Unlike static benchmarking reports, with Richey May Select, all information is current and available approximately six weeks after the end of each quarter.