In the first quarter of
2018, independent mortgage banks and mortgage subsidiaries of chartered banks posted
only their second period of financial losses in the ten years the Mortgage
Bankers Association (MBA) has covered the issue. This week MBA was able to report better news.
The Association’s Quarterly Mortgage Bankers Performance
Report says respondents to its quarterly survey had a net gain of $580 on
each loan they originated in the second quarter compared to a loss of $118 per
loan in the prior period. The only other
loss was in the first quarter of 2014, $194 per loan.
The average pre-tax
production profit was 21 basis points (bps) in the second quarter of 2018, up
from an average net production loss of eight bps in the first quarter of 2018,
but down 24 bps from the second quarter of 2017.
“After an exceptionally
weak start to the year, production profitability improved in the second quarter
as volume picked up from the spring home buying season. But profits were down
on a year-over-year basis and fell below typical second quarter results. When
measured in basis points, pre-tax net production income reached its lowest
level for any second quarter since the inception of our report in 2008,” said
Marina Walsh, MBA Vice President of Industry Analysis.
evidently responded to first quarter losses by reducing their expenses in the
second quarter, as production expenses dropped by over $1,000 per loan.
However, production revenues declined as competition for loans stiffened,
negating a portion of these cost-cutting efforts,” she added.
volume was $531 million per company in the second quarter of 2018, based on an average
production of 2,180 loans. In the first
quarter the volume was $450 million per company and 1,866 loans. For the
mortgage industry as a whole, MBA estimates for production volume in the second
quarter of 2018 were higher compared to the previous quarter.
Total production revenue,
including fee income, net secondary marking income and warehouse spread, was 347 bps in the second quarter compared to 370
bps the previous period. On a per-loan basis, production revenues decreased to
$8,458 per loan from $8,840.
Net secondary marketing
income was 271 bps compared to 292 in Q1. On a per-loan basis that income fell
to $6,650 from $7,040 per loan in the first quarter of the year.
Loan production expenses,
including commissions, compensation, occupancy, equipment, other production
expenses and corporate allocations was $7,877 per loan, down from a study high
of $8,957 in the first quarter of 2018. Over the history of MBA’s coverage,
from the third quarter of 2008 to the present quarter, loan production expenses
have averaged $6,266 per loan.
averaged $5,195 compared to $5,899 per loan in the first quarter and productivity
increased to 2.1 loans originated per production employee per month from 1.9 in
the first quarter of 2018. Production employees include sales, fulfillment and
production support functions.
The purchase share of
total originations, by dollar volume, increased to 81 percent in the first quarter
of 2018, its highest level since the study started. For the mortgage
industry as a whole, MBA estimates the purchase share at 74 percent in the
second quarter of this year. The average pull-through or closing rate (loan
closings to applications) was 72 percent, up from 70 percent the prior quarter.
The average size of first
mortgage loans originated during the quarter was the highest in the history of
the study, $255,136. This was up from $249,041
in the first quarter.
Including all business
lines (both production and servicing), 77 percent of the firms in the study
posted pre-tax net financial profits during the quarter, an improvement of 17