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Mortgage loan profits flag in Q3

Nonbank lenders produced more home loans on average in the third quarter, but their profits continue to flag because of higher production expenses and a market shifting away from refinancing, new data from the Mortgage Bankers Association (MBA) suggests.  

mortgageprofitLenders realized an average net gain of $929 per loan in the third quarter, down 17 percent from a $1,122-per-loan profit in the second quarter, the trade group said. 

"Despite rising average production volume, production expenses grew to $8,060 per loan — the second highest level reported since the inception of our study in the third quarter of 2008," said Marina Walsh, MBA’s vice president of industry analysis. 

"Production revenues remained relatively flat, with a minimal uptick in per-loan production revenues resulting from higher loan balances," Walsh said. Expenses, which include salaries, commissions and other costs of doing business, rose just under 4 percent in the quarter, from $7,774 in the second quarter, and have come up by 32 percent since the third quarter of 2008, MBA reported. 

Walsh said profits traditionally fall slightly in the third quarter against the second-quarter average. This year, the average profit per loan was also below the historic third-quarter average. Last year during the third quarter, nonbanks made an average per loan profit of $1,773, MBA reported last year. 

Production revenues averaged $8,990 per loan in the third quarter, up from $8,896 per loan in the second quarter. Production revenues were $8,742 per loan in the third quarter of 2016.

The surveyed companies were busier on average. Loan volume by count averaged 2,341 loans in the third quarter, up from 2,177 loans in the second quarter, MBA said.

The purchase share of total originations, by dollar volume, fell 2 percentage points, to 74 percent, in the third quarter, down from the study high in the second quarter. MBA estimated the purchase share for the entire industry at 68 percent in the third quarter. 


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