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Lower 2018 profits, volume for independent mortgage banks


New data from the Mortgage Bankers Association (MBA) revealed that independent mortgage banks saw their average profit per loan slashed by nearly half in 2018 compared to the previous year.

SmallHouseCoins

The MBA’s Annual Mortgage Bankers Performance Report showed an average 2018 profit of $367 per loan for independent mortgage banks and mortgage subsidiaries of chartered banks. That’s down 48 percent from a $711 per-loan profit in 2017.

Marina Walsh, MBA’s vice president of industry analysis, cited a variety of factors for the downturn.

“Despite a healthy economy in 2018, the mortgage market suffered, as rate hikes hurt refinancing volume and low housing inventories priced some potential homebuyers out of the purchase market,” Walsh said.

“For mortgage companies, there was the perfect storm of lower production revenues combined with rising expenses, which together contributed to the lowest net production income per loan since 2008. Production revenues per loan dropped despite study-high loan balances in 2018. At the same time, production expenses per loan grew to a study-high of $8,278 per loan last year.”

Those production expenses grew from $8,082 in 2017. Personnel expenses also were up, averaging $5,524 per loan in 2018, compared to $5,346 per loan in 2017.

The safety net for many lenders, Walsh said, was holding rights to mortgage servicing. Servicing income skyrocketed, growing from $64 per loan in 2017 to $203 in 2018. As a result, 69 percent of lenders posted overall pretax net financial profits in 2018 when taking both production and servicing operations into account. With net servicing income omitted from the equation, that number dropped to a mere 47 percent.

Including all business lines, 69 percent of lenders in the report saw pretax net financial profits in 2018, down from 80 percent in 2017.

The report also noted that independent mortgage banks posted an average 2018 production volume of $2 billion on 8,171 loans per company — down from $2.13 billion on 8,882 loans per company in 2017. Companies that reported their data in both 2017 and 2018 averaged a volume of $2.07 billion on 8,502 loans in 2018, down from their 2017 production average of $2.11 billion on 8,824 loans.

For the mortgage industry as a whole, MBA estimated 2018 production volume at $1.64 trillion, down from $1.76 trillion in 2017.

By dollar volume, the refinance share of all independent bank originations fell to 20 percent in 2018, down from 25 percent in 2017. In contrast, MBA estimated the refinancing share for the entire mortgage industry decreased last year to 28 percent, down from 35 percent in 2017.

The average loan balance for first-lien mortgages was $251,084 — up from $245,500 in 2017 and, as Walsh noted, a record high since the inception of the MBA’s Annual Performance Report in 2008. Loan balances on first mortgages have now risen, according to the report, for nine consecutive years.


 

Questions? Contact at (425) 984-6019 or arniea@scotsmanguide.com.

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