Mortgage Bankers Saw Average Profit Per Loan Dip in Q1


Mortgage bankers earned a net gain of $3,361 on each loan they originated in the first quarter, down from $3,738 in the fourth quarter of 2020, data from the Mortgage Bankers Association (MBA) shows.

The average pre-tax production profit was 124 basis points (bps), down from an average net production profit of 137 bps in the fourth quarter of 2020, but up on a year-over-year basis from 61 basis points in the first quarter of 2020.

“Despite dropping slightly from the fourth quarter of 2020, net production profits reached their highest level for any first quarter since the inception of MBA’s report in 2008,” says Marina Walsh, CMB, vice president of industry analysis for the MBA, in the latest Quarterly Mortgage Bankers Performance Report. “Triple-digit basis-point profitability was seen for the fourth consecutive quarter – another record that surpasses the 2012 boom generated from the Home Affordable Refinance Program (HARP).

“Average production volume was also down from the previous quarter, but was still at the highest level for any first quarter, as average loan balances continued their upward trajectory,” Walsh adds. “Production revenues dropped again after peaking in the third quarter of 2020, and while production expenses rose slightly, the pace flattened from the previous two quarters.”

Walsh also noted that there were more substantial improvements in net servicing financial profits, thanks to a recovery in the valuation of mortgage servicing rights (MSRs).

Combining both production and servicing operations, 97% of firms posted overall profitability for the first quarter. 

Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $7,964 per loan in the first quarter, up from $7,938 in the fourth quarter.

Personnel expenses averaged $5,523 per loan, up from $5,426 in the fourth quarter.

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