Another down quarter for independent mortgage banks

Numbers are up from record lows in the preceding quarter, but still far below recent norms

Independent mortgage banks (IMBs) saw another down quarter to open 2023, though not quite to the historic depths to which the market slid one quarter prior, according to new data from the Mortgage Bankers Association (MBA).

IMBs and mortgage subsidiaries of chartered banks reported a net loss of $1,972 on each loan they originated from January through March, per the MBA’s latest Quarterly Mortgage Bankers Performance Report. That’s up from the reported loss of $2,812 per loan in the fourth quarter of 2022, when IMBs recorded all-time lows in quarterly performance.

“A net production loss of 68 basis points in the first quarter of the year is an improvement over the record 99-basis-point loss reported in the fourth quarter of 2022,” said Marina Walsh, the MBA’s vice president of industry analysis. “Conditions continue to be challenging for the industry, with now four consecutive quarters of production losses and nine consecutive quarters of volume declines.”

Year over year, the first quarter’s net production loss was down from a 5 bps gain per loan. It also remains significantly below the average quarterly pre-tax production profit since the third quarter of 2008, which currently stands at 48 bps.

“One silver lining from the first quarter is that production revenues improved by 40 basis points,” noted Walsh. Indeed, total production revenues, including fee incomes, net secondary marketing income and warehouse spread, grew to 358 bps, up from 317 bps one quarter prior. Production revenues climbed to $11,199 per loan in Q1, up from $9,637 to close 2023.

But Walsh also pointed to the growth of production costs, which have risen as volumes have dropped. Despite what Walsh described as “substantial personnel reductions” at several firms, total loan production expenses, including commissions, compensation, occupancy, equipment and other costs, jumped to $13,171 per loan. That’s up from $12,450 per loan in the fourth quarter of 2022 and the highest expenses have been since MBA began tracking.

IMBs continue to struggle with profitability in the tepid real estate market. Just 32% of firms in the study pulling in pre-tax net profits including all business lines (production and servicing), though that’s up from 25% in the previous quarter.


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