MBA: 3Q IMB Profits Lag
MBA NewsLink Staff
Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $480 on each loan they originated in the third quarter, down from $580 per loan in the second quarter and $929 a year ago, the Mortgage Bankers Association reported this morning.
The MBA Third Quarter Quarterly Mortgage Bankers Performance Report also noted decreases in production volume and increases in production and personnel expenses.
"These are very challenging times for independent mortgage bankers, with the average pre-tax net production income per loan reaching its lowest level for any third quarter since inception of our report in 2008," said MBA Vice President of Industry Analysis Marina Walsh. "Profitability continues to be hindered by high costs and low productivity. We expect fixed costs to remain elevated and competitive pressures will continue to hamper production revenues in the winter months. Therefore, mortgage banker profitability will likely remain challenged."
However, the report noted mortgage servicing remains a "bright spot" for bankers, with relatively low delinquencies and high loan balances driving up per-loan servicing revenues. "Including all business lines, both production and servicing, 71 percent of the firms in the study posted a pre-tax net financial profit in the third quarter," Walsh said. "Without servicing, that percentage would have dropped to 52 percent."
Other key report findings:
--Average production volume decreased to $474 million per company in the third quarter, down from $531 million per company in the second quarter. Volume by count per company averaged 1,948 loans in the third quarter, down from 2,180 loans in the second quarter. For the mortgage industry as a whole, MBA estimated production volume in the third quarter was slightly higher from the second quarter.
--Average pre-tax production profit fell to 20 basis points in the third quarter, down slightly from an average net production profit of 21 bps in the second quarter and down 21 bps from a year ago.
--Purchase share of total originations, by dollar volume, increased to 82 percent in the third quarter, its highest level since inception of the study in 2008. For the mortgage industry as a whole, MBA estimated purchase share at 76 percent in the third quarter.
--Average loan balance for first mortgages reached a study high of $255,539 in the third quarter, up from $255,136 in the second quarter.
--Average pull-through rate (loan closings to applications) rose to 75 percent in the third quarter, up from 72 percent in the second quarter.
--Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 358 basis points in the third quarter, up from 347 bps in the second quarter. On a per-loan basis, production revenues increased to $8,654 per loan in the third quarter, up from $8,458 per loan in the second quarter.
--Net secondary marketing income increased to 280 basis points in the third quarter, up from 271 bps in the second quarter. On a per-loan basis, net secondary marketing income increased to $6,802 per loan in the third quarter from $6,650 per loan in the second quarter.
--Total loan production expenses--commissions, compensation, occupancy, equipment and other production expenses and corporate allocations--increased to $8,174 per loan in the third quarter, up from $7,877 per loan in the second quarter. From third quarter of 2008 to the present quarter, loan production expenses have averaged $6,312 per loan.
--Personnel expenses averaged $5,405 per loan in the third quarter, up from $5,195 per loan in the second quarter.
--Productivity decreased slightly to 1.9 loans originated per production employee per month in the third quarter, down from 2.1 in the second quarter. Production employees includes sales, fulfillment and production support functions.
--Including all business lines (both production and servicing), 71 percent of the firms in the study posted pre-tax net financial profits in the third quarter, down from 77 percent in the second quarter.
The MBA Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Eighty percent of the 342 companies that reported production data for the third quarter were independent mortgage companies; the remaining 20 percent were subsidiaries and other non-depository institutions.
MBA produces five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA's website by visiting http://www.mba.org/PerformanceReport.