MBA: Independent Mortgage Bankers’ Profits Increase Slightly in 2Q

Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,522 on each loan they originated in the second quarter, up from a reported gain of $1,447 per loan in the first quarter, the Mortgage Bankers Association reported this morning in its Quarterly Mortgage Bankers Performance Report.

“Average company production volume was up in the second quarter, as purchase volume grew and mortgage pipelines from the first quarter’s refinance boomlet closed,” said MBA Vice President of Industry Analysis Marina Walsh. “The production volume increase resulted in a nominal decrease in per-loan production expenses, which offset a decrease in secondary marketing income.”

However, Walsh noted by historical standards, production expenses remained elevated given that the average company production volume was at the highest level since inception of the study in 2008.

Other key report findings:

• Average production volume reached $657 million per company in the second quarter, up from $473 million per company in the first quarter. The volume by count per company averaged 2,714 loans in the second quarter, up from 1,917 loans in the first quarter.
• Average production profit was 67 basis points in the second quarter, compared to an average net production profit of 60 bps in the first quarter.
• Purchase share of total originations, by dollar volume, grew to 62 percent in the second quarter, up from 51 percent in the first quarter. For the mortgage industry as a whole, MBA estimates the purchase share at 57 percent in the second quarter.
• Jumbo share of total second mortgage originations by volume rose to 9.07 percent in the second quarter compared to 8.74 percent in the first quarter.
• Average loan balance for first mortgages grew to a study high of $244,350 in the second quarter, from $242,791 in the first quarter.
• Secondary marketing income fell to 294 basis points in the second quarter, down from 297 basis points in the first quarter.
• Total loan production expenses–commissions, compensation, occupancy, equipment and other production expenses and corporate allocations–decreased to $6,984 per loan in the second quarter, from $7,195 in the first quarter.
• Personnel expenses averaged $4,632 per loan in the second quarter, down from $4,675 per loan in the first quarter.
• The “net cost to originate” was $5,372 per loan in the second quarter, down from $5,597 in the first quarter. The net cost to originate includes all production operating expenses and commissions, minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
• Productivity increased to 2.8 loans originated per production employee per month in the second quarter compared to 2.4 in the first quarter.
• Including all business lines, 92 percent of firms in the study posted pre-tax net financial profits in the second quarter, up from 88 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. Seventy-four percent of the 354 companies that reported production data for the second quarter were independent mortgage companies; the remaining 26 percent were subsidiaries and other non-depository institutions.

In addition to the second quarter report, the Annual Performance Report on 2015 data is now available. MBA produces five performance report publications per year: four quarterly reports and one annual report.

The reports can be purchased on the MBA website, www.mba.org/PerformanceReport.