Mortgage bankers saw a net loss of $118 on each loan they originated in the first quarter, down from a gain of $237 in the fourth quarter of 2017, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.
It was only the second time since the inception of the report in 2008 that mortgage bankers saw an average net loss per loan.
Total origination volume continued to fall, as well. Average production volume was $450 million per reporting company, down from $505 million in the fourth quarter.
Of the lenders sharing their data with the MBA, each company averaged 1,866 loans in the first quarter, down from 2,059 loans in the fourth quarter.
For the mortgage industry as a whole, the MBA estimates that production volume in the first quarter was lower compared with the previous quarter.
Helping to drive the average profit per loan into the red was an ongoing increase in production expenses.
Total loan production expenses, including commissions, compensation, occupancy, equipment and other production expenses and corporate allocations, increased to a study-high of $8,957 per loan in the first quarter, up from $8,475 per loan in the fourth quarter.
For the period from the third quarter of 2008 to the present quarter, loan production expenses have averaged $6,224 per loan.
“In the first quarter of 2018, falling volume drove net production profitability into the red for only the second time since the inception of our report in the third quarter of 2008,” says Marina Walsh, vice president of industry analysis. “While production revenues per loan actually increased in the first quarter, we also reached a study-high for total production expenses at $8,957 per loan, as volume dropped.”
Personnel expenses averaged $5,899 per loan in the first quarter, up from $5,560 per loan in the fourth quarter.
The average pre-tax production loss was eight basis points (bps), down from an average net production profit of nine bps in the fourth quarter.
The purchase share of total originations, by dollar volume, was unchanged at 71% in the first quarter. For the mortgage industry as a whole, the MBA estimates that the purchase share in the first quarter was around 63%.
The average loan balance for first mortgages was $249,041, down from $254,291 in the fourth quarter.
The average pull-through rate (loan closings to applications) was 70%, down from 76%.
“For mortgage bankers who held mortgage servicing rights, higher per-loan servicing revenues and gains on the valuation of servicing helped overall profitability,” Walsh adds.