Mortgage Company Financial and Operational Performance

Transcription

1 RESI TRACK: Mortgage Company Financial and Operational Performance Marina B. Walsh Vice President, Industry Analysis Presentation Outline Industry Benchmarking Originations HMDA Data Latest IMB Performance Report Data Peer Group Data o o o Trending for Large Banks, Large Independents, Mid size Banks, Mid size IMBs Retail and Consumer Direct Production Channels Technology and Corporate Costs Mortgage Performance and Servicing Trends What Can We Expect in 2018? 2 1

2 Industry Benchmarking - Originations Shape of the Mortgage Industry Reporting Companies 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Number of Companies Reporting under HMDA 4,556 4,394 4,225 4,112 3,954 3,804 2,039 2,026 2,015 2,004 1,990 1, Large Depository Community Bank Credit Union (<$10bn Assets) Independent Mortgage Bank Source: HMDA 4 2

3 Shape of the Mortgage Industry Volume Share Share of Home Purchase Volume (#) by Company Type Share of Refinancing Volume (#) by Company Type 60% 60% 50% 40% 30% 20% 36% 30% 27% 24% 21% 21% 25% 26% 26% 25% 25% 23% 36% 40% 42% 46% 48% 51% 50% 40% 30% 20% 52% 45% 47% 34% 27% 26% 20% 19% 16% 17% 18% 18% 22% 28% 31% 41% 47% 49% 10% 4% 5% 5% 5% 5% 5% 10% 7% 7% 7% 8% 8% 7% 0% Large Depository Community Bank Credit Union (<$10bn Assets) Independent Mortgage Bank 0% Large Depository Community Bank Credit Union (<$10bn Assets) Independent Mortgage Bank Source: HMDA 5 IMB Net Production Profit (bps) Net Production Income (bps) Avg. Production Volume ($M) Purchase Share (% based on $) $ $ $ % % % 40.5 $600 $500 $400 $300 $200 $100 (8.3) $0 Q317 P Q217 Q117 Q416 Q316 Q216 Q116 Q415 Q315 Q215 Q115 Q414 Q314 Q214 Q114 Q413 Q313 Q213 Q113 Q412 Q312 Source: MBA s Quarterly Mortgage Bankers Performance Report: 6 3

4 IMB Net Production Profits Comparison Across Quarters: 2008 Current Avg. Quarterly Production Profit (bps): Production Profit (bps) Most Current Quarter Q4 Avg. Q416 Q1 Avg. Q117 Q2 Avg. Q217 Q3 Avg. Q317 (P) All QTR Avg. Avg. Q416 Q317 Source: MBA s Quarterly Mortgage Bankers Performance Report: 7 IMB Production Revenue and Expenses (bps) (25) Q312 Q217 Q117 Q416 Q316 Q216 Q116 Q415 Q315 Q215 Q115 Q414 Q314 Q214 Q114 Q413 Q313 Q213 Q113 Q412 Production Revenue (bps) Fully Loaded Production Expense (bps) Net Production Income (bps) Q317 P Source: MBA s Quarterly Mortgage Bankers Performance Report: 8 4

5 IMB Fully-Loaded Production Expenses ($ per loan) $260,000 Fully Loaded Production Expense ($ per loan) Avg. Loan Balance ($) $250,000 $240,000 $230,000 $220,000 $210,000 $200,000 5,163 5,603 5,779 5,818 6,368 6,959 8,025 6,932 6,769 7,000 7,195 6,984 7,080 7,747 7,845 7,120 6,969 7,562 8,887 7,774 8,060 $190,000 Q317 P Q217 Q117 Q416 Q316 Q216 Q116 Q415 Q315 Q215 Q115 Q414 Q314 Q214 Q114 Q413 Q313 Q213 Q113 Q412 Q312 Source: MBA s Quarterly Mortgage Bankers Performance Report: 9 IMB Servicing Retention Share 40.0% 35.0% Chart of the Week IMB Avg. Share of First Mortgage Volume That Is Servicing Retained 34.6% 30.0% 25.0% 20.0% 15.0% 10.0% 14.8% First Mortgage Volume Servicing Retained (% based on $) 25.3% 5.0% 0.0% Q209 Q109 Q408 Q308 Q110 Q409 Q309 Q410 Q310 Q210 Q411 Q311 Q211 Q111 Q312 Q212 Q112 Q213 Q113 Q412 Q114 Q413 Q313 Q115 Q414 Q314 Q214 Q415 Q315 Q215 Q316 Q216 Q116 Q217 Q117 Q416 Q317 P Source: MBA s Quarterly Mortgage Bankers Performance Report:

6 Peer Group Comparisons Peer Groups: Overall Net Production Income (bps) Large Banks Large Independents Mid Size Banks Mid Size Independents (29) (50.0) H2017 Source: PGR: MBA and STRATMOR Peer Group Roundtables:

7 Peer Groups: Investor Mix (% based on $) 2% Private Investor/Other 19% 11% 8% 5% Ginnie Mae I or II Program 38% 40% 8% 49% 40% 35% Fannie Mae/Freddie Mac (MBS) 12% 2% 27% 13% 19% Fannie Mae/Freddie Mac (Cash Window) Originated for Portfolio 3% 37% 31% 44% 29% 24% 4% Large Banks Large Independents Mid Size Hybrid Banks Mid Size CBCUs Mid Size Independents Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables: 13 Peer Groups: Production Channel Mix (% based on $) Consumer Direct Avg. Total Production Volume $43.1B $24.4B $2.9B $1.7B $3.0B 4% 7% 15% 17% 13% 5% 1% 7% 6% 2% 20% Correspondent 44% 47% Broker Wholesale 3% 13% 80% 90% 67% 39% Retail 23% Large Banks Large Independents Mid Size Hybrid Banks Mid Size CBCUs Mid Size Independents Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables:

8 Peer Groups: Weighted Avg. Purchase Channel Mix (% based on $) Consumer Direct Avg. Purchase Production Volume $22.5B $12.9B $1.3B $1.0B $1.9B 1% 3% 1% 12% 4% 5% 6% 1% 6% 2% 15% Correspondent 50% 56% Broker Wholesale 2% 12% 88% 92% 77% Retail 35% 32% Large Banks Large Independents Mid Size Hybrid Banks Mid Size CBCUs Mid Size Independents Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables: 15 Peer Groups: Retail Channel 8

9 Peer Groups: Retail Channel Product Mix (% based on #) Large Banks Large IMBs Mid Size Hybrid Banks Mid Size CBCUs Mid Size IMBs 74% 72% 75% 59% 53% 38% 35% 41% 44% 28% 30% 23% 19% 21% 15% 14% 14% 14% 11% 1% 4% 3% 4% 2% 4% Purchase First Time Homebuyer Government ARM Jumbo Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables: 17 Peer Groups: Fully-Loaded Retail Production Expenses as % of Total Retail Production Revenue Sales Expense Fulfillment Expense Production Support + Corporate Administration Expense 109% 34% 26% 91% 13% 20% 86% 16% 23% 83% 19% 23% 100% 88% 16% 19% 50% 58% 47% 41% 53% Large Banks Large Independents Mid Size Hybrid Banks Mid Size CBCUs Mid Size Independents Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables:

10 Fully-Loaded Retail Production Expenses as % of Total Retail Production Revenue (Total PGR Sample) Sales Expense Fulfillment Expense Production Support + Corporate Administration Expense 98% 100% 91% 90% 84% 24% 20% 18% 68% 18% 14% 21% 22% 21% 21% 16% 38% 45% 53% 50% 51% Source: PGR: MBA and STRATMOR Peer Group Roundtables: 19 Retail Channel Compensation Trends The gap between pay-out rates at banks and non-banks is widening for Retail Originators. Note: The grey bar indicates the gap in median effective pay-out rate between Banks and Non-Banks Median Effective Payout Rate (Bps) Non-Bank Bank Source: Residential Compensation Survey Program; McLagan, an AON Hewitt Company:

11 Retail Productivity (Total PGR Sample) Loans Closed per Loan Officer (per month) Loans Closed per Fulfillment FTE (per month) H2017* H2017* * Large Banks and Large Independents only for 1H2017 Source: PGR: MBA and STRATMOR Peer Group Roundtables: 21 Monthly Retail Underwriter Productivity (Total PGR Sample) Applications per Retail Underwriter per Month Monthly Productivity Defined: Average of the number of mortgage applications in a given year divided by the number of full time equivalent underwriters, divided by twelve. Underwriters include junior, senior and all other level underwriters as well as appraisal reviewers, validators and credit analysts Source: PGR: MBA and STRATMOR Peer Group Roundtables:

12 Peer Groups: Other Production Channels Average Channel Profitability bps (Total PGR Sample) Retail Broker Wholesale (50.0) (50.0) (8.6) Consumer Direct Correspondent (50.0) (50.0) Source: PGR: MBA and STRATMOR Peer Group Roundtables:

13 Consumer Direct Net Production Income by Business Model bps (Total PGR Sample) Consumer Direct Net Production Income by Business Model (Groups L & J Combined) Servicing Portfolio Retention (#) < 50% Servicing Portfolio Retention (#) >= 50% Customer Acquisition Focus Total PGR Sample (0.9) Source: PGR: MBA and STRATMOR Peer Group Roundtables: 25 Servicing Recapture (% Servicing Portfolio Retention Volume / # Payoffs) 30% 25% 25% 26% 20% 19% 19% 17% 15% 10% 5% 0% Large Banks Large Independents Mid Size Hybrid Banks Mid Size CBCUs Mid Size Independents Source: PGR (2016): MBA and STRATMOR Peer Group Roundtables:

14 Mortgage Performance and Servicing Trends Overall Delinquency Rate by Type Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q All Loans Conventional Loans FHA Loans VA Loans Source: NDS: National Delinquency Survey:

15 Looking Back at Hurricane Katrina Hurricane Katrina Aug 2005 Delinquency and Foreclosure Metrics Louisiana Non seasonally adjusted, percent Total Past Due Foreclosure Starts Source: NDS: National Delinquency Survey: 29 Net Servicing Income ($ per loan) Net Servicing Income Prime ($ per loan) $ Net Operating Income Before Taxes $400 Net Financial Income Before Taxes $ $ $ $0 (3) ($100) (57) (41) Source: MBA Servicing Operations Study and Forum (Prime Servicers): PGR (1H2017) 30 15

16 Direct Servicing Expenses ($ per loan) 4.11% 4.11% 4.46% Direct Servicing Expense Prime ($ per loan) Direct Servicing Expense Avg. Direct Servicing Expense NDS 90+ day Delinquency Rate (% based on #, annualized) 5.00% 4.50% 4.00% 3.46% 3.03% 3.50% % 2.63% 2.30% 2.50% 1.82% 1.51% 1.31% 2.00% 1.50% 1.00% 0.50% H2017* 0.00% Source: MBA Servicing Operations Study and Forum (Prime Servicers): PGR (1H2017) 31 The Costs of Performing and Non-Performing Loans $3,000 Cost of Performing Loans 2,777 $2,500 Cost of Non Performing Loans 2,304 2,414 2,386 $2,000 2,000 2,113 $1,500 1,369 $1, $500 $ H2017* Source: MBA Servicing Operations Study and Forum (Prime Servicers): PGR (1H2017) 32 16

17 Servicer Productivity Servicer Productivity Prime (Loans Serviced per Servicing FTE) 261 Avg. # Loans per Servicing FTE Avg. # Defaulted Loans per Default FTE ,638 1,101 1, H2017* Source: MBA Servicing Operations Study and Forum (Prime Servicers): PGR (1H2017) 33 IMB Servicing by Government/Non-Government % (based on #) Net Servicing Financial Income ($ per loan): < 50% Gov't Volume Net Servicing Financial Income ($ per loan): >= 50% Gov't Volume Annualized Net Servicing Financial Income ($ per loan) Total (100.0) (200.0) (300.0) Q317 P Q217 Q117 Q416 Q316 Q216 Q116 Q415 Q315 Q215 Q115 Q414 Q314 Q214 Q114 Q413 Q313 Q213 Q113 Q412 Q312 Source: MBA s Quarterly Mortgage Bankers Performance Report:

18 What is the MBA Quarterly Capital and Liquidity Profile? The Quarterly Capital and Liquidity Profile ( CLP ) provides a snapshot of seven key metrics often used by regulators, warehouse lenders, independent mortgage companies, correspondent lenders and other stakeholders. These basic metrics can be used to assess the capital adequacy and liquidity positions of independent mortgage bankers that own mortgage servicing rights. Using data from the quarterly Mortgage Bankers Financial Reporting Form (MBFRF) as well as MBA's industry-wide National Delinquency Survey, the metrics are now tracked on a quarterly basis starting 1Q 2017 for MBA members. The CLP includes data from those who report servicing within the MBFRF. The CLP also includes breakouts between servicers with more than a 50 percent share of government loans and servicers with less than a 50 percent share of government loans Technology Spending 18

19 Peer Groups: Production and Corporate Technology Expense ($ per loan) Large Banks Large Independents Mid Size Banks Mid Size Independents $1,400 $1,200 1,279 $1,000 1,028 $800 $600 $400 $ $ H2017 Source: PGR: MBA and STRATMOR Peer Group Roundtables: 37 What Can We Expect in 2018? 19

20 Some Alternatives to Consider in Consider Technology Investments More Spending (to gain Efficiencies) or Less Spending (to save $)? 2. Reduce Staff Sales Staff: Nonperformers; Salaried; Commissioned Processing, Underwriting, Closing Production Support Corporate Functions / Executive Management 3. Revise Commission, Bonus, Guarantees, Signing, Retention Structures 4. Use Contractors; Outsourcers; Temporaries 5. Be Selective about Training and Travel 6. Save on Benefits (401k, Healthcare, Vacation) 39 Some Alternatives to Consider in 2018 (continued) 7. Revisit Production Channel Mix 8. Evaluate Product Mix 9. Change Secondary Marketing Strategy 10. Change Servicing Strategy: To Retain or Not to Retain? 11. Grow Your Way to Economies of Scale in either Production, Servicing or Both 12. Gain Market Share 13. Use Opportunity to Buy or Sell 14. Wait for Competition to Exit 15. For Depositories, Think about the Customer in More Holistic Terms Mortgage as a Product vs. Separate Business Line 40 20

21 Questions? MBA Research Sign-Ups and Services 42 21

22 Contact Information Marina B. Walsh Vice President, Industry Analysis Research and Economics MBA Research: RIHA: