Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks saw a pre-tax net profit of $701 per origination in the third quarter of 2024, according to the Mortgage Bankers Association’s (MBA) latest Quarterly Mortgage Bankers Performance Report.

That’s up from $693 per loan in the second quarter, a second straight period of net production profits following a two-year trend of losses.

“Net production profits increased to 18 basis points last quarter — far improved from the average loss of 43 basis points the past two years — with a drop in secondary marketing income offset by a decrease in production expenses,” said Marina Walsh, the MBA’s vice president of industry analysis.

Walsh noted that lower interest rates likely led to higher prepayment rates in the third quarter, resulting in mortgage servicing rights impairments and reduced profitability on the servicing side of the business. As a result, net servicing financial income dropped to a loss of $25 per loan serviced, compared to a gain of $69 per loan in the second quarter.

Average pre-tax production profits rose to 18 bps in the third quarter from 17 basis points in the second and from a loss of 34 bps in the third quarter last year. Production profits are still far short of historical averages; the average quarterly pre-tax production profit from the third quarter of 2008 to the most recent quarter has been 42 bps.

The average production volume per company in the third quarter was $542 million, up from $492 million in the second quarter. The average number of loans originated per company also increased from 1,503 loans in the second quarter to 1,642 loans in the third.

“Overall, it was a decent showing for independent mortgage banks with 71% reporting profitability across production and servicing operations, compared to 78% in the second quarter,” added Walsh.