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Nonbank profits per loan sink in Q3

Nonbank mortgage profits continue to suffer as a result of the downturn in refinancing business, stiff competition for customers and higher costs, new tracking data suggests.

loanprofNonbanks realized a net gain of $480 per loan in the third quarter, the lowest amount for a third quarter since at least 2008, according to the Mortgage Bankers Association (MBA). The third-quarter per-loan profit was down from $580 per loan in the second quarter and from $929 per loan in the third quarter of 2017. The third-quarter net gain figure also was less than half of the average third-quarter profit of around $1,200 per loan since 2008, according to MBA.

“These are very challenging times for independent mortgage bankers,” said Marina Walsh, MBA’s vice president of industry analysis. “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.”

Average loan volumes dropped to $474 million per company, down from $531 million in the second quarter. In the third quarter of 2017, nonbanks averaged $569 million in loan volume. By mortgage count, companies averaged 1,948 loans, down from 2,180 loans in the second quarter and down from 2,341 loans in the third quarter of 2017.

Rising production costs and lower productivity also have been a big issue for nonbank lenders.

Total mortgage-production expenses increased to $8,174 per loan in the third quarter, up from $7,877 per loan in the second quarter. In the third quarter of 2017, the per loan expense was $8,060. Productivity declined to 1.9 loans originated per production employee, down from 2.1 loans this past second quarter and 2.1 loans in the third quarter of 2017.

One bright spot is servicing, which has remained profitable as a result of low delinquency rates and high loan balances.

“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.”


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