After seeing profits fall into the red in the fourth quarter, mortgage bankers saw profits inch back into the black in the first quarter – this despite falling origination volume – the Mortgage Bankers Association’s (MBA) Mortgage Bankers Performance Report shows.
During the fourth quarter, mortgage lenders reporting their data to the MBA saw an average net loss of about $200 per loan – however, in the first quarter, they reported a net gain of $285.
Production costs, however, continued to rise. Total loan production expenses including commissions, compensation, occupancy, equipment and other production expenses and corporate allocations increased to a study high of $9,299 per loan, up from $8,611 in the fourth quarter.
Personnel expenses averaged $5,931 per loan, up from $5,636 in the fourth quarter.
Marina Walsh, vice president of industry analysis for the MBA, says the improvement in profits
is “a welcoming sign following a very difficult end of 2018, in which profitability reached its lowest level since our survey’s inception in 2008.”
“Mortgage application volume picked up strongly toward the end of the first quarter as rates dropped, increasing the pipeline of loans for the second quarter,” Walsh explains in a statement. “Given the drop in rates, lenders also enjoyed a boost in secondary marketing gains.”
The average pre-tax production profit was seven basis points (bps) in the first quarter, up from an average net production loss of 11 bps in the fourth quarter.
Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 393 bps, up from 351 bps in the fourth quarter.
On a per-loan basis, production revenues increased to a study high $9,584 per loan, up from $8,411 per loan in the fourth quarter.
Net secondary marketing income increased to 308 bps in the first quarter, up from 269 bps in the fourth quarter.
On a per-loan basis, net secondary marketing income increased to $7,591 from $6,466.
Average production volume was $385 million per company in the first quarter, down from $440 million per company in the fourth quarter.
The average pull-through rate (loan closings to applications) was 69%, down from 75%.