Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $4,548 per loan during the second quarter, according to the Mortgage Bankers Association’s (MBA) new Quarterly Mortgage Bankers Performance Report.
That’s nearly three times the production profit of $1,600 per loan that IMBs pulled in the first quarter, yet another signal that the housing and mortgage industry is not only surviving the coronavirus crisis, but thriving.
“Fueled by a surge in borrower demand and record-low mortgage rates, mortgage production profits in the second quarter reached the highest level since the inception of MBA’s report in 2008,” said Marina Walsh, the organization’s vice president of industry analysis. “Production volume averaged over $1 billion per company, and there was an ideal combination of higher revenues and lower costs.”
Average production volume per company hit $1.02 billion, as Walsh noted, up from $728 million per company in the first quarter. Companies averaged 3,631 loans in the second quarter, up from 2,654 loans in the quarter prior.
Total production revenue grew to 429 basis points, up from 362 basis points in the first quarter. Per loan, that translates to $11,686 in the second quarter, up from $9,582 in the first. Expenses per loan, meanwhile, retreated, averaging $7,138 per loan in the second quarter, down quarterly from $7,982.
Productivity also saw a boost in the second quarter, rising to 3.5 loans originated per production employee per month. That’s a level unseen since 2012, said Walsh, up from 2.7 loans per production employee per month in the first quarter.
And with home prices continuing to rise thanks to surging demand and limited inventory, the average loan balance for first mortgages grew to an all-time high, hitting $282,309 in the second quarter. That’s up from $276,291 in the preceding three months.
Walsh did mention that servicing profitability took a hit in the second quarter, blemishing an otherwise rosy report for the nation’s independent mortgage bankers.
“Mortgage servicing right (MSR) markdowns and amortization continued, and there was a loss of servicing income from elevated default activity. Despite these servicing losses, 96% of firms in the report posted overall profitability for the second quarter.”
As expected, refinances made up the lion’s share of IMB and chartered bank subsidiary loans, with purchase originations falling to 39% in the second quarter compared to 52% in the first. The purchase share for independent institutions is slightly higher than for the entire industry at large; for the mortgage industry as a whole, the MBA estimated the second quarter purchase share at 37%.