MBA: IMB Profits Slow in 2nd Quarter
Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $2,023 on each loan they originated in the second quarter, down from $3,361 per loan in the first quarter, the Mortgage Bankers Association reported Tuesday in its Quarterly Mortgage Bankers Performance Report.
MBA Vice President of Industry Analysis Marina Walsh, CMB, noted net production profits dropped to the lowest level since first quarter 2019, but remained above their historic quarterly average. “Competition stiffened, production volume declined and the market began to shift towards more purchase activity and less refinances,” she said. “The result for mortgage lenders was a combination of lower revenues and higher expenses.”
Walsh said production revenues have declined for three straight quarters and per-loan production expenses have increased for four straight quarters, “which is a strong indication that the industry is moving away from the record-high, extraordinary profits of 2020.”
The report also noted a decline in servicing profitability, resulting from mortgage servicing right markdowns and increased operating expenses. Combining both production and servicing operations, 85 percent of firms posted overall profitability for the second quarter, compared to 97 percent in the first quarter.
Other key report findings:
- Average pre-tax production profit fell to 73 basis points in the second quarter, down from 124 bps in the first quarter and down from 167 basis points a year ago. Average quarterly pre-tax production profit, from third quarter 2008 to the most recent quarter, is 55 basis points.
- Average production volume fell to $1.35 billion per company in the second quarter, down from $1.44 billion per company in the first quarter.Volume by count per company averaged 4,615 loans in the second quarter, down from 4,879 loans in the first quarter.
- Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 375 bps in the second quarter, down from 408 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,691 per loan in the second quarter, down from $11,325 per loan in the first quarter.
- Net secondary marketing income decreased to 297 bps in the second quarter, down from 331 bps in the first quarter. On a per-loan basis, net secondary marketing income decreased to $8,500 per loan in the second quarter from $9,283 per loan in the first quarter.
- Purchase share of total originations, by dollar volume, increased to 57 percent in the second quarter from 39 percent in the first quarter. For the mortgage industry as a whole, MBA estimates purchase share at 44 percent in the second quarter.
- Average loan balance for first mortgages increased to a new study high of $297,816 in the second quarter, up from $288,551 in the first quarter.
- Average pull-through rate (loan closings to applications) was unchanged at 76 percent in the second quarter.
- Total loan production expenses – commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – increased to $8,668 per loan in the second quarter, up from $7,964 per loan in the first quarter. From third quarter 2008 to last quarter, loan production expenses have averaged $6,660 per loan.
- Personnel expenses averaged $5,911 per loan in the second quarter, up from $5,523 per loan in the first quarter.
- Productivity increased to 3.7 loans originated per production employee per month in the second quarter from 3.6 loans per production employee per month in the first quarter. Production employees includes sales, fulfillment and production support functions.
- Servicing net financial income for the second quarter (without annualizing) fell to $7 per loan, down from $154 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, rose to $71 per loan in the second quarter, up from $65 per loan in the first quarter.
- Including all business lines (both production and servicing), 85 percent of the firms in the study posted pre-tax net financial profits in the second quarter, down from 97 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. Eighty-three percent of the 361 companies that reported production data for the second quarter were independent mortgage companies; the remaining 17 percent were subsidiaries and other non-depository institutions.
MBA produces five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.