MBA: Independent Mortgage Bank Production Profits Improved in 2nd Quarter
Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,122 on each loan they originated in the second quarter, up from a reported gain of $224 per loan in the first quarter, the Mortgage Bankers Association reported yesterday in its Quarterly Mortgage Bankers Performance Report.
“Production profitability improved in the second quarter as volume picked up with the spring home buying season and a slight drop in mortgage rates,” said MBA Vice President of Industry Analysis Marina Walsh. “Production revenues declined due to increased competition, but that was more than offset by per loan expenses dropping to levels comparable with other recent quarters of similar volume.”
“While profits were up in the second quarter compared to the first quarter of 2017, they lagged the second quarter profits of 2015 and 2016 given the movement away from refinances towards a purchase market,” Walsh added.
Key report findings:
–Average production volume rose to $526 million per company in the second quarter, up from $455 million per company in the first quarter. Volume by count per company averaged 2,177 loans in the second quarter, up from 1,944 loans in the first quarter.
–Average pre-tax production profit rose to 46 basis points in the second quarter, up from 10 basis points in the first quarter. Since inception of the Performance Report in third quarter 2008, net production income has averaged 51 basis points.
–Purchase share of total originations, by dollar volume, reached a study high of 76 percent in the second quarter, compared to 68 percent in the first quarter. For the mortgage industry as a whole, MBA estimated purchase share at 68 percent in the second quarter.
–Average loan balance for first mortgages rose to $248,619 in the second quarter, up from $242,949 in the first quarter.
–Average pull-through rate (loan closings to applications) rose to 72 percent in the second quarter, up from 70 percent in the first quarter.
–Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 377 basis points in the second quarter, down from 395 basis points in the first quarter. On a per-loan basis, production revenues decreased to $8,896 per loan in the second quarter, from $9,111 per loan in the first quarter.
–Net secondary marketing income decreased to 302 basis points in the second quarter, down from 322 basis points in the first quarter. On a per-loan basis, net secondary marketing income decreased to $7,160 per loan in the second quarter, down from $7,469 per loan in the first quarter.
–Total loan production expenses–commissions, compensation, occupancy, equipment and other production expenses and corporate allocations–decreased to $7,774 per loan in the second quarter, from $8,887 in the first quarter. For the period third quarter 2008 to the present quarter, loan production expenses have averaged $6,035 per loan.
–Personnel expenses averaged $5,119 per loan in the second quarter, down from $5,802 per loan in the first quarter.
–Productivity increased to 2.5 loans originated per production employee per month in the second quarter, from 1.7 in the first quarter. Production employees includes sales, fulfillment and production support functions.
–Net servicing financial income was $27 per loan in the second quarter, down from $225 per loan in the first quarter.
–Including all business lines, 86 percent of the firms in the study posted pre-tax net financial profits in the second quarter, up from 67 percent in the first quarter.
The MBA Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Three-fourths of the 345 companies that reported production data for the second quarter were independent mortgage companies; the remaining 25 percent were subsidiaries and other non-depository institutions.
In addition to the second quarter report, the Annual Performance Report on 2016 data is also available. MBA produces five performance report publications per year: four quarterly reports and one annual report. The reports can also be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.