Mortgage lenders saw a pre-tax net profit of $701 on each loan they originated in the third quarter, up from $693 per loan in the second quarter, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.
The average pre-tax production profit was 18 basis points (bps), up from the reported 17 bps in the second quarter, according to the report, which uses data provided by independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks.
That’s down from 34 basis points one year ago.
The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 42 basis points.
“Mortgage companies reported net production profits for the second consecutive quarter after an unprecedented period of net production losses that spanned two years,” says Marina Walsh, CMB, vice president of industry analysis for the MBA, in a statement. “Net production profits increased to 18 basis points last quarter – far improved from the average loss of 43 basis points the past two years – with a drop in secondary marketing income offset by a decrease in production expenses.”
On the servicing side of the business, the likelihood of higher prepayments in the third quarter resulted in mortgage servicing right (MSR) impairments and less profitability.
Net servicing financial income dropped to a loss of $25 per loan serviced in the third quarter, from a gain of $69 per loan observed in the second quarter.
“Overall, it was a decent showing for independent mortgage banks with 71 percent reporting profitability across production and servicing operations, compared to 78 percent in the second quarter,” Walsh says.
Of the lenders reporting data to the MBA, average production volume was $542 million per company in the third quarter, up from $492 million in the second quarter.
The volume by count per company averaged 1,642 loans in the third quarter, up from 1,503 loans in the second quarter.
Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – decreased to 323 basis points in the third quarter, down from 330 basis points in the second quarter.
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