Profit slump for independent lenders

by Steve Randall17 Apr 2018

Independent mortgage banks and mortgage subsidiaries of chartered banks had to work harder for their profits in 2017.

The average profit per loan slumped to $711 from $1,346 in 2016 according to new figures from the Mortgage Bankers Association.

"Production profits dropped by almost half in 2017 as rate-term refinancings diminished and the overall average production volume dropped," said Marina Walsh, MBA's Vice President of Industry Analysis.

She added that production revenues rose with higher loan balances offsetting competitive pressures, but expenses were also higher for sales, fulfillment, production support and corporate allocations.

That meant production expenses reached a study-high $8,082 per loan for the MBA Annual Performance Report.

"For those mortgage bankers holding mortgage servicing rights (MSR), higher loan balances drove up per-loan servicing fees and helped overall profitability. Including both production and servicing operations, 80% of the firms in the study posted overall pre-tax net financial profits in 2017, down from 94% in 2016," Walsh continued.

Average production volume was $2.13 billion (8,882 loans) per company in 2017, compared to $2.68 billion (11,106 loans) per company in 2016.

On a repeater company basis, average production volume was $2.11 billion (8,783 loans) in 2017, compared to $2.32 billion (9,625 loans) in 2016.

For the mortgage industry as whole, MBA estimates production volume at $1.71 trillion in 2017, from $2.05 trillion in 2016.

Refinancing share drops to 25%
For independent lenders, the refinancing share of all originations fell to 25% in total dollar volume, from 38% in 2016. The MBA estimates that for the whole mortgage industry there was a drop to 35% from 49%.

The average loan balance for first mortgages reached a study-high of $245,500 in 2017, from $244,945 in 2016. This is the 8th consecutive year of rising loan balances on first mortgages.


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