Independent Mortgage Bank Production Profits Improved in 2nd Quarter

WASHINGTON, D.C. (August 30, 2017) – (RealEstateRama) — 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 of 2017, up from a reported gain of $224 per loan in the first quarter of 2017, the Mortgage Bankers Association (MBA) reported today 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 Marina Walsh, MBA’s Vice President of Industry Analysis.  “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.”

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“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 findings of MBA’s Quarterly Mortgage Bankers Performance Report include:

  • Average production volume was $526 million per company in the second quarter of 2017, up from $455 million per company in the first quarter of 2017. The volume by count per company averaged 2,177 loans in the second quarter of 2017, up from 1,944 loans in the first quarter of 2017.
  • The average pre-tax production profit was 46 basis points (bps) in the second quarter of 2017, up from an average net production profit of 10 bps in the first quarter of 2017. Since the inception of the Performance Report in the third quarter of 2008, net production income has averaged 51 bps.
  • The purchase share of total originations, by dollar volume, reached a study high of 76 percent in the second quarter of 2017, compared to 68 percent in the first quarter of 2017. For the mortgage industry as a whole, MBA estimates the purchase share at 68 percent in the second quarter of 2017.
  • The average loan balance for first mortgages was $248,619 in the second quarter of 2017, up from $242,949 in the first quarter of 2017.
  • The average pull-through rate (loan closings to applications) was 72 percent in the second quarter of 2017, up from 70 percent in the first quarter of 2017.
  • Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 377 basis points in the second quarter of 2017, down from 395 bps in the first quarter of 2017.  On a per-loan basis, production revenues decreased to $8,896 per loan in the second quarter of 2017, from $9,111 per loan in the first quarter of 2017.
  • Net secondary marketing income decreased to 302 basis points in the second quarter of 2017, down from 322 bps in the first quarter of 2017.  On a per-loan basis, net secondary marketing income decreased to $7,160 per loan in the second quarter of 2017, down from $7,469 per loan in the first quarter of 2017.
  • 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 of 2017, from $8,887 in the first quarter of 2017.  For the period from the 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 of 2017, down from $5,802 per loan in the first quarter of 2017.
  • Productivity increased to 2.5 loans originated per production employee per month in the second quarter of 2017, from 1.7 in the first quarter of 2017.  Production employees includes sales, fulfillment and production support functions.
  • Net servicing financial income was $27 per loan in the second quarter of 2017, down from $225 per loan in the first quarter of 2017.
  • Including all business lines, 86 percent of the firms in the study posted pre-tax net financial profits in the second quarter of 2017, up from 67 percent in the first quarter of 2017.

MBA’s 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. 75 percent of the 345 companies that reported production data for the second quarter of 2017 were independent mortgage companies and 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. There are five performance report publications per year: four quarterly reports and one annual report. Media wishing to view a copy of either report should contact Ali Ahmad at (202) 557-2727 or ">. 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.

CONTACT
Ali Ahmad

(202) 557- 2727

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field.

Contact:

Mortgage Bankers Association
1331 L Street, NW
Washington, DC 20005

Phone: (202) 557-2700

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