Mortgage banks see net gains tumble

Mortgage banks saw net gains in the fourth quarter plummet to just a third of their Q3 levels, according to new data from the Mortgage Bankers Association.

According to the MBA’s quarterly mortgage bankers’ performance report, independent mortgage banks and mortgage subsidiaries of chartered banks netted $575 per loan originated in Q4 2016, compared with Q3 2016’s recorded gain of $1,773 per loan.

"Rapid increases in interest rates in the last two months of 2016 slowed mortgage activity in the fourth quarter, driving a significant decrease in loan production profits," said Marina Walsh, MBA vice president of industry analysis. "Mortgage lenders reported a combination of both lower revenues and higher expenses. On the revenue side, secondary marketing income dropped as mortgage lenders wrestled with less favorable pricing and pipeline challenges. At the same time, production expenses per loan rose as fixed costs were spread over fewer loans."

Average production volume went down from $764 million per company in the third quarter to $690 million per company in the Q4, while the volume by count per company decreased from 3,072 loans in Q3 to 2,811 loans in Q4.

Meanwhile, the average loan balance for first mortgages was $246,473 in Q4 – a decrease from Q3’s $251,398.

"Those mortgage lenders with servicing portfolios benefited from higher net servicing financial income in the fourth quarter due to increases in the valuation of their mortgage servicing rights, driven by the same rising interest rates,” Walsh said. “However, the reduced profitability on the production side of the business generally outweighed servicing gains.”


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