Independent mortgage bankers and chartered banks’ mortgage units gained
The second quarter of 2019 saw a surge in profit per loan for mortgage loans originated by independent mortgage banks and the mortgage subsidiaries of chartered banks.
The $1,675 profit was up sharply from the $285 in the first quarter of 2019 according to the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report.
"Production profits in the second quarter of 2019 were the best MBA has seen since the third quarter of 2016 ($1,773 per loan), as production volume rose and expenses declined significantly," said Marina Walsh, MBA's Vice President of Industry Analysis. "In fact, 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."
Servicing meant bigger losses
Walsh explained that anticipated increases in prepayment activity meant hits to servicing profitability resulting from mortgage servicing right markdowns and amortization. Servicing net financial income for the second quarter (without annualizing) was a loss of $74 per loan, compared to a loss of $37 per loan in the first quarter.
But the profitability on the production side of the business generally outweighed servicing losses. Including production and servicing, 85% of the firms in the study posted pre-tax net financial profits in the second quarter, up from 59% in the first quarter.
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.
Costs down, productivity up
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.
Productivity increased to 2.3 loans originated per production employee per month in the second quarter, up from 1.8 loans per production employee per month in the first quarter.
