Streak of strong quarters continues for independent mortgage banks

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks realized a net gain of $3,738 on each loan they originated in the fourth quarter of 2020, according to new data from the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.

While that’s down from the near-record high of $5,535 per loan posted during the third quarter, that figure remains one of the strongest in history, per Marina Walsh, vice president of industry for the MBA.

“Driven by strong borrower demand and a study-high in average loan balances, production volume for independent mortgage companies reached unprecedented heights, averaging close to $1.5 billion per company in the fourth quarter of 2020,” she said. “Net production profits were at their third-highest levels, surpassed only by last year’s second and third quarter.”

Average production volume per company, as Walsh noted, was reported at $1.47 billion, up from $1.34 billion per company in the third quarter. Companies were also able to fund more loans during the period with an average mortgage count of 5,049, up from 4,732 loans in the quarter prior.

Average pre-tax production profit in the fourth quarter came in at 137 basis points (bps), down from 203 bps in the third quarter but up from 46 bps year over year. Walsh observed that while production profits remained robust, secondary marketing income declined, falling to 346 bps in the fourth quarter from 394 in the third. On a per-loan basis, that translates to $9,655 per loan, down from $10,883 in the quarter prior.

This resulted in a drop in overall production revenue, which fell to 421 bps in the fourth quarter, down from 475 bps in the third. Per loan, production revenues declined to from $12,987 in the third quarter to $11,676 in the fourth quarter.

And while higher loan volumes have traditionally meant lower per-loan costs, production expenses also rose for the second straight quarter, ending the fourth quarter at $7,938 per loan.

“Expenses rose by almost $500 per loan from the previous quarter, as personnel costs increased across sales, fulfillment, production support, and corporate overhead,” Walsh said.

Still, the period continued the streak of high profitability for independent lenders. Taking all business lines (production and servicing) into account, 95% of the companies assessed by the MBA reported pre-tax profits, down from 99% in the third.


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