IMBs Report Second Quarter Losses

Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net loss of $82 on each loan they originated in the second quarter, the Mortgage Bankers Association reported Thursday.

The MBA Quarterly Mortgage Bankers Performance Report said the next loss compared to a reported gain of $223 per loan in the first quarter. The report said average pre-tax net production income per loan reached its lowest level since fourth quarter 2018.

“The second quarter of 2022 did not yield the usual spring seasonal pick-up in purchase activity, in an environment of higher mortgage rates, low housing inventory and affordability challenges,” said Marina Walsh, CMB, MBA Vice President of Industry Analysis. “Combining both production and servicing operations, only 57 percent of the companies in our report were profitable. Pulling out a profit in these difficult conditions is no easy feat.”

Key findings of the MBA Second-Quarter Quarterly Mortgage Bankers Performance Report:

• Average pre-tax production loss fell to 5 basis points in the second quarter, down from an average net production profit of 5 bps in the first quarter and down from 73 basis points a year ago. The only other quarters in the survey’s history to record net production losses were first quarter 2014 (8 basis points); first quarter 2018 (8 basis points) and fourth quarter 2018 (11 basis points). Average quarterly pre-tax production profit, from third quarter 2008 to the most recent quarter is 54 basis points.
• Average production volume fell to $705 million per company in the second quarter, down from $808 million per company in the first quarter. Volume by count per company averaged 2,139 loans in the second quarter, down from 2,587 loans in the first quarter.
• Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 335 bps in the second quarter, down from 350 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,855 per loan in the second quarter, down from $10,861 per loan in the first quarter.
• Net secondary marketing income decreased to 243 bps in the second quarter, down from 270 bps in the first quarter. On a per-loan basis, net secondary marketing income decreased to $7,939 per loan in the second quarter from $8,429 per loan in the first quarter.
• The purchase share of total originations, by dollar volume, increased to 81 percent in the second quarter from 63 percent in the first quarter. For the mortgage industry as a whole, MBA estimated purchase share at 70 percent in the second quarter.
• The average loan balance for first mortgages increased to a new study high of $337,130 in the second quarter, up from $324,368 in the second quarter.
• Average pull-through rate (loan closings to applications) increased to 75 percent in the second quarter, up from 73 percent in the first quarter.
• Total loan production expenses – commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – increased to a study-high of $10,937 per loan in the second quarter, up from $10,637 per loan in the first quarter. From third quarter 2008 to last quarter, loan production expenses have averaged $6,902 per loan.
• Personnel expenses averaged $7,371 per loan in the second quarter, up from $7,113 per loan in the first quarter.
• Servicing net financial income for the second quarter (without annualizing) fell to $133 per loan, down from $242 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 $97 per loan in the second quarter, up from $94 per loan in the first quarter.
• Including all business lines (both production and servicing), 57 percent of firms in the study posted pre-tax net financial profits in the second quarter, down from 72 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-four percent of the 334 companies that reported production data for the second quarter were independent mortgage companies; the remaining 16 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. The reports can be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.