Increased sales volume and lower mortgage rates push profits higher
An increase in sales volume coupled with lower mortgage rates resulted in higher production profitability among independent mortgage banks and mortgage subsidiaries of chartered banks, according to the quarterly mortgage bankers performance report by Mortgage Bankers Association (MBA).
For each loan originated during the quarter, the net gain was $1,122, up from the $224 net gain per loan in the first quarter.
"Production profitability improved in the second quarter as volume picked up with the spring home-buying season and a slight drop in mortgage rates," said Marina Walsh, MBA's vice president of industry analysis. "Production revenues declined due to increased competition, but that was more than offset by per-loan expenses dropping to levels comparable with other recent quarters of similar volume."
Companies covered by the report posted an average production volume of $526 million during the quarter, an increase from $455 million in the prior quarter. Volume by count averaged 2,177 loans, rising from 1,944 loans last quarter.
"While profits were up in the second quarter compared to the first quarter of 2017, they lagged the second quarter profits of 2015 and 2016 given the movement away from refinances towards a purchase market," Walsh said.
Of total activity, the share of purchase originations by dollar volume was 76%, a record high for the study. This compares to the 68% share in the first quarter. First mortgages during the quarter had loan balances of $248,619 on average, compared to the first-quarter average of $242,949. The average pull-through rate was 72%, up from 70% in the previous quarter.
Additionally, during the quarter, total production revenue fell to 377 basis points from 395 basis points in the prior quarter. Production revenue on a per-loan basis likewise fell during the quarter to $8,896 per loan from $9,111 per loan in the first quarter.
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For each loan originated during the quarter, the net gain was $1,122, up from the $224 net gain per loan in the first quarter.
"Production profitability improved in the second quarter as volume picked up with the spring home-buying season and a slight drop in mortgage rates," said Marina Walsh, MBA's vice president of industry analysis. "Production revenues declined due to increased competition, but that was more than offset by per-loan expenses dropping to levels comparable with other recent quarters of similar volume."
Companies covered by the report posted an average production volume of $526 million during the quarter, an increase from $455 million in the prior quarter. Volume by count averaged 2,177 loans, rising from 1,944 loans last quarter.
"While profits were up in the second quarter compared to the first quarter of 2017, they lagged the second quarter profits of 2015 and 2016 given the movement away from refinances towards a purchase market," Walsh said.
Of total activity, the share of purchase originations by dollar volume was 76%, a record high for the study. This compares to the 68% share in the first quarter. First mortgages during the quarter had loan balances of $248,619 on average, compared to the first-quarter average of $242,949. The average pull-through rate was 72%, up from 70% in the previous quarter.
Additionally, during the quarter, total production revenue fell to 377 basis points from 395 basis points in the prior quarter. Production revenue on a per-loan basis likewise fell during the quarter to $8,896 per loan from $9,111 per loan in the first quarter.
Related stories:
Ex-Fannie Mae exec to head Flagstar’s mortgage business
How do borrowers select mortgage lenders?
