Independent Mortgage Bank Volumes Up, Production Profits Stable in 3rd Quarter 2016

WASHINGTON, D.C. – December 8, 2016 – (RealEstateRama) — Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,773 on each loan they originated in the third quarter of 2016, up from a reported gain of $1,686 per loan in the second quarter of 2016, the Mortgage Bankers Association (MBA) reported today in its Quarterly Mortgage Bankers Performance Report.

MBA

“Including all business lines, 94 percent of mortgage lenders in our study reported pre-tax net financial profits in the third quarter of 2016, compared to 90 percent in the second quarter of 2016,” said Marina Walsh, MBA’s Vice President of Industry Analysis.

“An increase in production volume and slight decrease in expenses in the third quarter kept production profits relatively stable. These profits would have been even higher were it not for a decline in net secondary marketing income, primarily income related to mortgage servicing rights,” Walsh continued.

“For the first time since the second quarter of 2015, production expenses were below $7,000 per loan, at $6,969 per loan.  However, these expenses remain elevated by historical standards.  Given the increase in loan count and the higher pull-through rate compared to the second quarter, we would have expected an even larger reduction in production expenses.  Loan balances continued their upward march and reached another study-high of $247,563, which helped keep production revenue per loan relatively flat despite a revenue drop in basis points from the previous quarter.”

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

  • Average production volume was $764 million per company in the third quarter of 2016, up from $654 million per company in the second quarter of 2016. The volume by count per company averaged 3,072 loans in the third quarter of 2016, up from 2,721 loans in the second quarter of 2016.
  • The average pre-tax production profit was 74 basis points (bps) in the third quarter of 2016, compared to an average net production profit of 73 bps in the second quarter of 2016. Production profits for the third quarter of 2016 are also up from production profits of 55 bps in the third quarter of 2015. Since the inception of the Performance Report in the third quarter of 2008, net production income has averaged 53 bps.
  • The purchase share of total originations, by dollar volume, was 60 percent in the third quarter of 2016, down from 66 percent in the second quarter of 2016. For the mortgage industry as a whole, MBA estimates the purchase share at 53 percent in the third quarter of 2016.
  • The jumbo share of total first mortgage originations by dollar volume was down at 7.66 percent in the third quarter of 2016, compared to 8.49 percent in the second quarter of 2016.
  • The average loan balance for first mortgages reached a study-high of $247,563 in the third quarter of 2016, from the previous study-high of $245,394 in the second quarter of 2016.
  • The average pull-through rate (loan closings to applications) was 73.33 percent in the third quarter of 2016, from 71.06 percent in the second quarter of 2016.
  • Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 365 basis points in the third quarter of 2016, down from 372 bps in the second quarter of 2016.  On a per-loan basis production revenues decreased to $8,742 per loan in the third quarter of 2016, down from $8,807 per loan in the second quarter of 2016.
  • Net secondary marketing income decreased to 291 basis points in the third quarter of 2016, down from 303 bps in the second quarter of 2016.  On a per-loan basis, net secondary marketing income decreased to $7,037 per loan in the third quarter of 2016, down from $7,196 per loan in the second quarter of 2016.
  • Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – decreased to $6,969 per loan in the third quarter of 2016, from $7,120 in the second quarter of 2016.  For the period from the third quarter 2008 to the present quarter, loan production expenses have averaged $5,850 per loan.
  • Personnel expenses averaged $4,675 per loan in the third quarter of 2016, down from $4,771 per loan in the second quarter of 2016.
  • Productivity increased to 2.9 loans originated per production employee per month in the third quarter of 2016, from 2.5 in the second quarter.  Production employees includes sales, fulfillment and production support functions.
  • Including all business lines, 94 percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2016, from 90 percent in the second 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. 74 percent of the 345 companies that reported production data for the third quarter of 2016 were independent mortgage companies and the remaining 26 percent were subsidiaries and other non-depository institutions.

In addition to the third quarter report, the Annual Performance Report on 2015 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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