Mortgage Bankers Association (MBA) said on Wednesday that independent mortgage
banks and mortgage
subsidiaries of chartered banks reported net production losses in the first
quarter of 2018, for only the second time since MBA began tracking the data in
2008. The bankers who responded to MBA’s
survey reported a net loss of $118 on each loan they originated, down
from a reported gain of $237 per loan in the fourth quarter of 2017.
The net production
losses, of 8 basis points was down from an average net production profit of 9
bps in the fourth quarter of 2017. The first quarter loss was not as
severe as the $194 per loan (also 8 basis points) seen in the first quarter of
2014, the only other quarter in the survey’s history to record a net production
Marina Walsh, MBA’s Vice
President of Industry Analysis said, “While production revenues per loan
actually increased in the first quarter, we also reached a study-high for total
production expenses at $8,957 per loan, as volume dropped.”
“For mortgage bankers
who held mortgage servicing rights, higher per-loan servicing revenues and gains
on the valuation of servicing helped overall profitability,” Walsh continued.
Including all business
lines (both production and servicing), 60 percent of the firms in the study
posted pre-tax net financial profits in the first quarter of 2018, from 56
percent in the fourth quarter of 2017.
Total production revenue
(fee income, net secondary marking income and warehouse spread) increased to
370 basis points in the first quarter of 2018 or $8,840 per loan. In the fourth quarter of 2017 the income was 362
bps or $8,712 per loan.
These revenues however
were offset by the highest level of production expenses in the history of the
study These expenses, which include commissions,
compensation, occupancy, equipment, and other production expenses and corporate
allocations, totaled $8,957 per loan compared to $8,475 per loan in the fourth
quarter of 2017. For the period from the third quarter of 2008 to the present
quarter, loan production expenses have averaged $6,224 per loan. Personnel
expenses averaged $5,899 per loan compared to $5,560 the previous quarter.
Net secondary marketing
income increased by 1 basis point to 292 compared to the fourth quarter of
2017. On a per-loan basis, net secondary marketing income increased slightly from
$7,037 per loan to $7,040.
volume was $450 million per company on a volume count of 1,866 loans. In the fourth quarter the dollar volume was $505
million, and companies averaged 2,059
loans. For the mortgage industry as a
whole, MBA estimates for production volume in the first quarter of 2018 were
lower compared to the previous quarter.
Employee productivity declined
to 1.9 loans originated per production employee per month from 2.0 loans the
prior quarter. The average pull-through rate (loan closings to applications) fell
from 76 percent to 70 percent. The purchase share of total originations, by
dollar volume, was unchanged at 71 percent, higher than the estimate of 63 from
MBA for the overall mortgage industry.
The average loan balance
for the first mortgages originated during the quarter was down slightly from $254,291
the prior quarter to $249,041.