Have you ever analyzed your productivity per employee? This is a key indicator in whether your bank makes or loses money in mortgage origination. Personnel expenses averaged $5,346 per loan in 2017, compared to $4,801 the prior year. Productivity fell to 1.9 loans originated per production employee from 2.4 in 2016. Production employees include sales, fulfillment and production support functions. (1) A reduction in volume is often the culprit in having your productivity per employee go negative. Another way productivity drops is by having additional tasks, like compliance change implementations, placed on each employee.
The Mortgage Bankers Association said that per-loan profits for 2017 were $711, only slightly more than half the $1,346 in profits reported in 2016. The full year average for 2016 topped that of any single quarter in 2017. (1)
“Production profits dropped by almost half in 2017 as rate-term refinancing’s diminished and the overall average production volume dropped,” said Marina Walsh, MBA’s Vice President of Industry Analysis. (1)
As a community bank, where should you start in analyzing your revenue? First, determine your gross margin. Second, take a deep dive into analyzing your costs, using the Delta as your profit or loss.
Northpointe Community Lending has developed a simple cost template to help community banks find out where they stand in their cost to produce a mortgage loan.
To receive the template, email Neil Armstrong, SVP of Community Lending at firstname.lastname@example.org.