On Thursday, independent mortgage banks and mortgage subsidiaries of chartered banks reported a drop in net gains in each loan they originated in Q3 2017, according to the MBA’s Quarterly Mortgage Bankers Performance Report.
Of the 347 companies reporting, 75 percent reporting were independent mortgage companies and the remaining 25 percent were subsidiaries and other non-depository institutions.
The results show that independent mortgage banks reported a net gain of $929 in Q3 2017—representing a decrease from a gain of $1,122 per loan in the Q2 2017. In addition, this is a drop from the study’s Q3 average of $1,197 per loan.
“Historically for this study, average production profits in the third quarter of the year have performed slightly below the second quarter,” said Marina Walsh, MBA’s VP of Industry Analysis. “But production profits were also down in relation to historical averages for the third quarter.
Walsh added, “Despite rising average production volume, production expenses grew to $8,060 per loan—the second highest level reported since the inception of our study in the third quarter of 2008.”
Meanwhile, production revenues remained relatively flat, with a minimal uptick in per-loan production revenues resulting from higher loan balances.
“For those mortgage bankers holding mortgage servicing rights (MSR), lower MSR valuation losses helped overall profitability,” Walsh continued.
As for production volume, the average was $569 million per company in Q3 of 2017, up from $526 million per company in Q2 of 2017. Meanwhile, the volume count per company averaged 2,341 loans in the Q3 of 2017, an increase from 2,177 loans in the Q2 of 2017.
By dollar volume, the purchase share of total originations was 74 percent in the Q3 2017, down from the study high of 76 percent in the Q2 of 2017. For the mortgage industry as a whole, the report estimates the purchase share at 68 percent in the Q3 of 2017.
Net secondary marketing income decreased to 298 basis points in the Q3 of 2017, down from 302 basis points in the Q2 of 2017. On a per-loan basis, net secondary marketing income was $7,181 per loan in the Q3 2017—an increase from $7,160 per loan in the Q2 2017.
Other key findings of the report include:
- The average pre-tax production profit was 40 basis points (bps) in the Q3 of 2017, down from an average net production profit of 46 bps in the Q2 of 2017.
- The average loan balance for first mortgages reached $251,109 in the Q3 of 2017, up from $248,619 in the Q2 of 2017.
- The average pull-through rate (loan closings to applications) was 73 percent in the Q3 of 2017, up from 72 percent in the Q2 of 2017.
- Personnel expenses averaged $5,279 per loan in the Q3 of 2017, up from $5,119 per loan in the Q2 of 2017.
- Productivity decreased to 2.1 loans originated per production employee per month in the Q3 of 2017, from 2.5 in the Q2 of 2017.
- Net servicing financial income was $79 per loan in the Q3 of 2017, up from $27 per loan in the Q2 of 2017.