MBA: Mortgage-production profits reach three-year high

Mortgage-production profits during second-quarter 2019 were at their highest level since 2016, the Mortgage Bankers Association (MBA) reported.

Independent mortgage banks and mortgage subsidiaries of chartered banks posted a net gain of $1,675 per loan in the second quarter. That’s the best since profits reached $1,773 per loan in third-quarter 2016, and it represented a massive gain from the $285 per-loan profit in the first quarter of this year. The surge in profits was propelled by a rise in production volume and expenses that dropped by more than $1,500 per loan, according to the MBA.

That decline, in fact, was the largest quarterly decline in production expenses the MBA has seen since it began studying production profits in 2008.

“With anticipated increases in prepayment activity, we saw hits to servicing profitability resulting from mortgage-servicing-right markdowns and amortization,” said Marina Walsh, the MBA’s vice president of industry analysis. “Nonetheless, the profitability on the production side of the business generally outweighed servicing losses.”

Interestingly, total production revenue — including fee income, net secondary marking income and warehouse spread — actually declined between the first and second quarters of this year. Production revenues totaled $9,584 per loan in the first quarter, the highest in the history of the study. Second-quarter production revenue, on the other hand, receded to $9,400 per loan.

But the record production revenues of first-quarter 2019 were offset by $9,299 per loan in production expenses, including commissions, compensation, occupancy, equipment and other production expenses, and corporate allocations. That $9,299 figure also was the highest in the study’s history. In comparison, per-loan production expenses during the second quarter were $7,725. 

Notably, the second-quarter figure is still higher than the average loan-production expense of $6,465 per loan from third-quarter 2008 through second-quarter 2019.

Average production volume vaulted to $601 million per company in the second quarter, compared to $385 million in the first quarter. Lenders originated an average of 2,313 loans in the second quarter, up from 1,571 loans in the preceding three months.

Productivity increased to 2.3 loans originated per production employees each month. That’s up from 1.8 loans per employee each month in the preceding quarter.


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