Lenders Enjoy Greater Profits per Loan

Last year was profitable for independent mortgage banks and the mortgage subsidiaries of chartered banks, according to new data from the Mortgage Bankers Association (MBA). Although 2015 was marked with a drop in profits during the second half of the year, lenders earned an average profit of $1,189 on each loan they originated—a handsome increase from the $747 per loan level in 2014.

Furthermore, higher production volume fueled 2015 net production profits to 52 basis points (bps), up 18 bps from the previous year. Average production volume increased to $2.40 billion (9,906 loans) per company, up year-over-year from $1.57 billion (6,779 loans) per company in 2014.

“Because of larger loan balances, per-loan profits were at their third highest levels since 2008,” said MBA Vice President of Industry Analysis Marina Walsh. “Average loan balances for this sample grew seven percent from 2014 to 2015 and have grown 22 percent since 2008.”

However, it also became more expensive to originate mortgages. Total loan production expenses—including commissions, compensation, occupancy, equipment and other production expenses and corporate allocations—increased to $7,046 per loan in 2015, up from $6,950 in 2014, while personnel expenses averaged $4,699 per loan in 2015, up from $4,500 per loan in 2014. The "net cost to originate" was $5,567 per loan in 2015, up from $5,200 in 2014.