Mortgage Lenders Saw Average Profit Per Loan Rise in the Second Quarter

0

Mortgage lenders reported a net gain of $1,675 on each loan they originated in the second quarter, up from $285 per loan in the first quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.

It was the most profitable quarter since the third quarter of 2016, when the average profit per loan was $1,773.

The increase in profits was due mostly to a decrease in production costs.

Increasing refinance share likely played a role in the dip in production costs, as did increasing use of automation.

Total loan production expenses – commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – decreased to $7,725 per loan in the second quarter, down from a study high of $9,299 per loan in the first quarter, according to the report.

From the third quarter of 2008 to last quarter, loan production expenses had averaged $6,465 per loan.

Personnel expenses averaged $5,186 per loan in the second quarter, down from $5,931 per loan in the first quarter.

Marina Walsh, vice president of industry analysis for the MBA, says the drop in production expenses by over $1,500 per loan “was the largest quarterly decline reported since the inception of this study in 2008.”

The average loan balance for first mortgages reached a study high of $268,520 in the second quarter, up from $257,374 in the first quarter.

The average pull-through rate (loan closings to applications) was 70%, up from 69%.

Mortgage servicers saw their average profit per loan decrease by $74, compared to a loss of $37 per loan in the first quarter.

Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, was $42 per loan in the second quarter, compared to $58 per loan in the first quarter.

“With anticipated increases in prepayment activity, we saw hits to servicing profitability resulting from MSR markdowns and amortization,” Walsh says. “Nonetheless, the profitability on the production side of the business generally outweighed servicing losses.”

Net secondary marketing income decreased to 287 bps, down from 308 bps in the first quarter.

On a per-loan basis, net secondary marketing income decreased to $7,411, down from $7,591.

Leave a Comment
Your email address will not be published. Required fields are marked *

avatar
  Subscribe  
Notify of