Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $200 on each loan they originated in the fourth quarter of 2018, down from a reported gain of $480 per loan in the third quarter of 2018, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.
“Independent mortgage bankers continued to struggle in this very competitive mortgage market environment, with the average pre-tax net production income per loan reaching its lowest level since the inception of our report in 2008,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “Among the headwinds for mortgage bankers were lower volume, lower revenues and higher costs relative to the previous quarter.”
Added Walsh, “On the servicing side of the business, mortgage servicing right impairments resulting from December’s drop in interest rates hurt profitability. Including all business lines (both production and servicing), only 44 percent of the firms in the study posted a pre-tax net financial profit in the fourth quarter.”
Key findings of MBA’s latest Quarterly Mortgage Bankers Performance Report include:
- Average production volume was $440 million per company in the fourth quarter of 2018, down from $474 million per company in the third quarter of 2018. The volume by count per company averaged 1,799 loans in the fourth quarter, down from 1,948 loans in the third quarter. For the mortgage industry as a whole, MBA estimates for production volume in the fourth quarter was lower compared to the previous quarter.
- The average pre-tax production loss reached 11 basis points (bps) in the fourth quarter, down from an average net production profit of 20 bps in the third quarter, and down 20 bps from the fourth quarter of 2017 – a new low since the report began in 2008 Production profitability was in the red in only two other quarters – the first quarter of 2014 and the first quarter of 2018.
- The purchase share of total originations, by dollar volume, decreased to 79 percent in the fourth quarter of 2018, from a study-high of 82 percent in the third quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 74 percent last quarter.
- The average loan balance for first mortgages was $253,689 in the fourth quarter, down from $255,539 in the third quarter.
- The average pull-through rate (loan closings to applications) remained unchanged at 75 percent in the fourth quarter.
- Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 351 basis points in the fourth quarter, down from 358 bps in the third quarter. On a per-loan basis, production revenues decreased to $8,411 per loan in the fourth quarter, down from $8,654 per loan in the third quarter.
- Net secondary marketing income decreased to 269 basis points in the fourth quarter, down from 280 bps in the third quarter. On a per-loan basis, net secondary marketing income decreased to $6,466 per loan in the fourth quarter from $6,802 per loan in the third quarter.
- Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $8,611 per loan in the fourth quarter, up from $8,174 per loan in the third quarter. For the period of the third quarter of 2008 to last quarter, loan production expenses have averaged $6,367 per loan.
- Personnel expenses averaged $5,636 per loan in the fourth quarter, up from $5,405 per loan in the third quarter.
- Productivity decreased to 1.8 loans originated per production employee per month in the fourth quarter, down from 1.9 in the third quarter. Production employees includes sales, fulfillment and production support functions.
- Including all business lines (both production and servicing), 44 percent of the firms in the study posted pre-tax net financial profits in the fourth quarter, down from 71 percent in the third quarter.
MBA’s Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Eighty percent of the 343 companies that reported production data for the fourth quarter of 2018 were independent mortgage companies, and the remaining 20 percent were subsidiaries and other non-depository institutions.
There are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Media wishing to view a copy of either report should contact Adam DeSanctis at (202) 557-2727 or adesanctis@mba.org. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA’s website by visiting www.mba.org/PerformanceReport.
CONTACT
Adam DeSanctis
adesanctis@mba.org
(202) 557-2727