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MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research Department PowerPoint PPT Presentation

MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research Department About the MBA/STRATMOR Peer Group Program PROGRAM OBJECTIVES:

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MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research Department

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MBA 2006 Non-Prime Lending Conference

Issues and Trends in the Non-Prime Market

May 22, 2006

Marina Walsh

MBA Research Department


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About the MBA/STRATMOR Peer Group Program

  • PROGRAM OBJECTIVES:

  • To create a means for participating mortgage banking companies to review their financial results in relation to their peers at semi-annual intervals.

  • To offer timely data that will allow quick responses to changing business environments.

  • To analyze the factors that drive mortgage business performance.

  • To provide participants with a forum to discuss financial results through roundtable meetings at an off-site location.

  • To offer maximum comparative analysis through the following peer groups:

    • Non-prime lenders and servicers (sample size – 18).

    • Four prime peer groups: Megalenders; Large lenders; Small/medium sized lenders and thrift institutions.


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2005 Non-Prime Highlights

  • Production volumes increased by 42% overall in 2005 (33% for repeater companies).

  • Overall non-prime production net income declined to 52 bps in 2005 from 119 bps in 2004.

    • Margin decline was primarily due to a sharp decline in gain on sale, partially offset by decreased production costs.

    • Prime margins in 2005 averaged about 16 basis points.

  • Average loan servicing portfolios increased by 33% in 2005.

  • Loan servicing profits improved to $236 per loan in 2005 from $173 per loan in 2004.

    • Higher service fee income due to higher average loan balances.

    • Continuing reduction in cost to service.


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Non-Prime Average Production Volume ($M)

Source: MBA/STRATMOR Peer Group Survey

Non-prime volumes increased by 33% for repeater companies from 2004 to 2005, while overall MBA industry volumes were flat.


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2005 Non-Prime Production Mix

Source: MBA/STRATMOR Peer Group Survey


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Non-Prime Production Income Detail

Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle, Broker Production Channel

Net Gain on Sale includes: Capitalized MSRs, SRPs, Fees paid to Brokers, and Secondary Marketing Gain.


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Non-Prime Broker Channel: Production Expenses

Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle, Broker Production Channel

Decreases in per-loan expense only partially offset revenue declines from 2004-2005.


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Non-Prime Average Servicing Volume per Company

Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle

Avg. servicing portfolios up an average of 33% in 2005.


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2005 Non-Prime Servicing Results

Source: MBA/STRATMOR Peer Group Survey


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Non-Prime Servicing Direct Expense

Source: MBA/STRATMOR Peer Group Survey, Preliminary Data

Source: MBA/STRATMOR Peer Group Survey


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For More Information

  • Studies for Subprime Lenders/Servicers:

    • Peer Group Survey and Roundtables

    • Servicing Operations Study and Operations Forum

    • Annual Technology Focus Group Study

    • National Delinquency Survey

    • Single Family Mortgage Originations Survey

    • Annual Compensation Survey

  • Contact MBA Research at (202) 557-2817 for more information


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