“Production profits more than doubled in the second quarter of 2016, as production volume rose and expenses dropped to a level not seen since the third quarter of 2015,” said Marina Walsh, MBA vice president of industry analysis. “Mortgage lenders also benefited from higher loan balances that reached a series-high of $245,394 and drove production revenue to a series high of $8,807 per loan.
“With elevated prepayment activity, we continued to see hits to servicing profitability resulting from mortgage servicing right markdowns and amortization,” she added. “Nonetheless, the profitability on the production side of the business generally outweighed servicing losses. Including all business lines, 90% of mortgage lenders in our study reported pre-tax net financial profits in the second quarter of 2016, compared to 73% in the first quarter of 2016.”
Other key findings in the MBA’s quarterly performance report included:
- Average production volume was up, hitting $654 million per company in the second quarter. Average production volume in the first quarter was $517 million per company. The average volume by count was 2,721 loans in Q2, up from 2,196 loans in Q1.
- The average pre-tax production profit in Q2 was 73 basis points, up from 33 basis points in the first quarter.
- The purchase share of originations, by total dollar volume, rose to 66% in the second quarter from 61% in the first. MBA estimates that the purchase share for the industry as a whole was 54% in Q2.
- The average loan balance for first mortgages hit a study high of $245,394 in Q2, from $237,419 in the first quarter.
- Total production revenue, including fee income, secondary marketing income and warehouse spread, decreased to 372 basis points in Q2 from Q1’s average of 377 basis points. Still, rising loan balances helped per-loan production revenues increase to a study high of $8,807 in the second quarter.
- Total loan production expenses dropped to $7,120 per loan from Q1’s average of $7,845 per loan.
- Personnel expenses were also down, dropping to $4,771 per loan in the second quarter from $5,141 in the first quarter.
- Productivity was up, meanwhile, averaging 2.5 loans per production employee per month. In the first quarter, the average was two loans per production employee.
- Servicing net financial income for the second quarter was a loss of $160 per loan, compared to a $118 per-loan loss in Q1. Servicing operating income fell to $192 per loan from Q1’s $205 per loan.
Independent mortgage bankers and mortgage subsidiaries saw per-loan production profits spike in the second quarter of 2016, up from $825 in Q1 to $1,686, according to the Mortgage Bankers Association.