Independent Mortgage Bank Volumes Decrease, Production Profits Drop in 1st Quarter 2017

WASHINGTON, D.C. (June 7, 2017) –- (RealEstateRama) — Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $224 on each loan they originated in the first quarter of 2017, down from a reported gain of $575 per loan in the fourth quarter of 2016, the Mortgage Bankers Association (MBA) reported today in its Quarterly Mortgage Bankers Performance Report.

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“The drop in overall production volume in the first quarter of 2017 resulted in the highest per-loan production expenses reported since inception of our study in the third quarter of 2008,” said Marina Walsh, MBA’s Vice President of Industry Analysis.  “While higher production revenues mitigated a portion of the cost increase, production profitability nonetheless declined by more than half the previous quarter.”

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Walsh added, “For those mortgage bankers holding mortgage servicing rights (MSR), an increase in mortgage interest rates resulted in MSR valuation gains and helped overall profitability.”

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

  • Average production volume was $455 million per company in the first quarter of 2017, down from $690 million per company in the fourth quarter of 2016. The volume by count per company averaged 1,944 loans in the first quarter of 2017, down from 2,811 loans in the fourth quarter of 2016.
  • The average pre-tax production profit was 10 basis points (bps) in the first quarter of 2017, down from an average net production profit of 24 bps in the fourth quarter of 2016. 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, was 68 percent in the first quarter of 2017, compared to 58 percent in the fourth quarter of 2016. For the mortgage industry as a whole, MBA estimates the purchase share at 59 percent in the first quarter of 2017.
  • The average loan balance for first mortgages was $242,949 in the first quarter of 2017, down from $246,473 in the fourth quarter of 2016.
  • The average pull-through rate (loan closings to applications) was 70 percent in the first quarter of 2017, down from the study-high of 76 percent in the fourth quarter of 2016.
  • Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 395 basis points in the first quarter of 2017, up from 347 bps in the fourth quarter of 2016.  On a per-loan basis, production revenues increased to $9,111 per loan in the first quarter of 2017, from $8,137 per loan in the fourth quarter of 2016.
  • Net secondary marketing income increased to 322 basis points in the first quarter of 2017, up from 272 bps in the fourth quarter of 2016.  On a per-loan basis, net secondary marketing income increased to $7,469 per loan in the first quarter of 2017, up from $6,433 per loan in the fourth quarter of 2016.
  • Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a study-high of $8,887 per loan in the first quarter of 2017, from $7,562 in the fourth quarter of 2016.  For the period from the third quarter 2008 to the present quarter, loan production expenses have averaged $5,985 per loan.
  • Personnel expenses averaged $5,802 per loan in the first quarter of 2017, up from $5,001 per loan in the fourth quarter of 2016.
  • Productivity decreased to 1.7 loans originated per production employee per month in the first quarter of 2017, from 2.7 in the fourth quarter of 2016.  Production employees includes sales, fulfillment and production support functions.
  • Net servicing financial income was $225 per loan in the first quarter of 2017, compared to a loss of $118 per loan in the first quarter of 2016.  Like the fourth quarter of 2016, mortgage companies reported overall gains in the valuation of servicing rights.
  • Including all business lines, 67 percent of the firms in the study posted pre-tax net financial profits in the first quarter of 2017, down from 73 percent in the fourth quarter of 2016.

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. 76 percent of the 342 companies that reported production data for the first quarter of 2017 were independent mortgage companies and the remaining 24 percent were subsidiaries and other non-depository institutions.

In addition to the first 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

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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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