Mortgage bankers made an average profit of $2,339 on each loan they originated in 2021, down from a record $4,202 in 2020, according to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report.
Still, that’s no reason to weep, as “2021 was another stellar year for independent mortgage bankers, with production profits well above average,” says Marina Walsh, CMB, vice president of industry analysis for the MBA, in the report.
“Performance in the second half of 2021 declined relative to the first half of the year, which is an indication of where market conditions are heading in 2022 in an environment of high expenses, rising mortgage rates, and lower refinance originations,” Walsh says.
Unfortunately, there’s dark clouds on the horizon.
“The widespread upward pressure on rates will diminish rate-term refinance volume, and housing inventory shortages pose challenges for purchase originations,” Walsh says. “Staying profitable will require prudent cost management, as well as more reliance on servicing operations to serve as a hedge against production declines.”
Of course, one major reason average profit per loan decreased in 2021 was rising production costs. As per the MBA’s data, total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $8,664 per loan in 2021, up from $7,578 in 2020.
Personnel expenses averaged $5,971 per loan, up from $5,272 per loan in 2020.
The average loan balance for first mortgages reached a study-high of $298,324 in 2021, up from $278,725 in 2020.
This is the largest single-year increase in the history of the report.
Average production volume was $4.9 billion (16,590 loans) per company, up from $4.5 billion (16,198 loans) per company in 2020.
On a repeater company basis, average production volume was $5.1 billion (17,238) in 2021, up from $4.9 billion (17,592 loans) in 2020.
In basis points, the average production profit (net production income) was 82 basis points in 2021, compared to 157 basis points in 2020. In the first half of 2021, net production income averaged 100 basis points, then decreased to 62 basis points in the second half.
Since the inception of MBA’s Annual Performance Report in 2008, net production income by year has averaged 60 basis points ($1,456 per loan).
Of the 273 firms that reported production, 84% were independent mortgage companies and the remaining 16% were subsidiaries and other non-depository institutions.
“After a truly phenomenal ride for mortgage companies, more difficult times are expected in 2022 and possibly beyond,” Walsh says. “The widespread upward pressure on rates will diminish rate-term refinance volume, and housing inventory shortages pose challenges for purchase originations.”
