Analyst highlights better performance across surveyed companies
Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks have achieved their first net production profit in two years, according to the Mortgage Bankers Association’s (MBA) latest Quarterly Mortgage Bankers Performance Report. The industry reported a pre-tax net profit of $693 per loan originated in the second quarter of 2024, a significant turnaround from the $645 loss per loan seen in the first quarter.
This positive development ends an eight-quarter streak of net production losses for IMBs. “Net production income was positive in the second quarter of 2024—a welcome sign after eight consecutive quarters of net production losses,” said Marina Walsh, MBA’s vice president of industry analysis. She attributed the improvement to several factors, including increased quarterly volume, higher productivity, and a better pull-through rate from application to closing. Additionally, production costs dropped by approximately $1,800 per loan, helping offset a decrease in production revenues compared to the previous quarter.
Walsh further highlighted that nearly 80% of the firms included in the analysis posted overall profits for the second quarter, including gains from both production and servicing operations. “After two of the most challenging years in the mortgage business, many companies are seeing light at the end of the tunnel,” she said.
Breaking an eight-quarter streak of losses
Key findings from the second-quarter report included:
- Increased profitability: 78% of the firms reported pre-tax net financial profits, up from 59% in the first quarter.
- Production volume: The average production volume per company rose to $492 million, up from $384 million in the previous quarter. The number of loans per company increased from 1,193 in the first quarter to 1,503 in the second quarter.
- Production revenue: Total production revenue fell slightly to 347 basis points, compared to 371 basis points in the first quarter. On a per-loan basis, production revenue decreased to $11,499 from $11,947.
- Cost reductions: Total loan production expenses dropped to 330 basis points from 395 basis points in the first quarter. Per-loan costs decreased from $12,593 to $10,806.
- Servicing income: Servicing net financial income was $69 per loan, down from $82 in the first quarter, while servicing operating income was $88 per loan, down from $93.
The MBA’s Mortgage Bankers Performance Report serves as a financial and operational benchmark for independent mortgage companies, bank subsidiaries, and other non-depository institutions. The second-quarter report included data from 345 companies, with 82% being independent mortgage firms.
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