Independent mortgage banks (IMBs) saw their production profits take a step back during the second quarter, the Mortgage Bankers Association (MBA) reported.
IMBs and mortgage subsidiaries of chartered banks reported a net gain of $2,023 on each loan they originated from April through June, per the MBA’s Quarterly Mortgage Bankers Performance Report. That’s down from $3,361 per loan, reaching the lowest level since the first quarter of 2019 — though still above their historical quarterly average, observed Marina Walsh, the MBA’s vice president of industry analysis.
“Competition stiffened, production volume declined, and the market began to shift towards more purchase activity and less refinances,” Walsh explained. “The result for mortgage lenders was a combination of lower revenues and higher expenses.”
Walsh also noted that production revenues have dipped for three consecutive quarters, while per-loan production expenses have grown for four quarters straight, which she called “a strong indication that the industry is moving away from the record-high profits of 2020.
Total production revenue fell to 375 basis points in the second quarter, down from 408 BPS in the first. That translated to $10,691 per loan in production revenues during Q2, down from $11,325 in Q1.
Total production expenses, meanwhile, increased to $8,668 per loan in the second quarter, up from $7,964 per loan in the first. Personnel expenses were at $5,911 per loan on average, up quarterly from $5,523.
Increased operating expenses, combined with mortgage servicing rights markdowns, also helped push down servicing profitability in the second quarter. Servicing net financial income during the period fell to just $7 per loan, a big drop from $154 per loan one quarter before.
With both production and servicing operations taken into account, 85% of firms posted pre-tax profits in the second quarter, down from 97% during the first three months of the year.