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Q2 Profits Up for PMIs, Independent Mortgage Bankers

Phil Hall
Aug 28, 2018
Today's first-time homebuyer is older and more likely to be single than first-time homebuyers in the 1970s and 1980s, according to a new Zillow analysis

The second quarter of this year was a lucrative three-month period for the nation’s private mortgage insurers (PMIs) and independent mortgage bankers.
Moody’s reported that PMIs produced approximately $80.3 billion of new insurance written (NIW) during the second quarter, up 14 percent from one year earlier. NIW totaled $138.8 billion during the first half of the year while production was up 14 percent on the year.
The PMIs' profitability took an upswing in the second quarter, with firms reporting a combined pretax operating income of $1 billion, up 15 percent from $909 million in the second quarter of 2017. For the first half of 2018, sector pretax operating income rose to $1.9 billion, an 18 percent spike from the same period one year earlier.
“We continue to see PMIs emphasizing the quality of new insurance written, as it lays the foundation for a strong future earnings stream,” said Moody’s in its report on this industry. “With lenders’ underwriting standards providing strong credit quality on the front end, new MI business continues to be high quality.”
Separately, the Mortgage Bankers Association (MBA) reported independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $580 on each loan they originated in the second quarter, a turnaround from the reported loss of $118 per loan in the first quarter. Average production volume was $531 million per company in the second quarter, up from $450 million per company in the first quarter, and the volume by count per company averaged 2,180 loans in the second quarter, up from 1,866 loans in the first quarter of 2018. For the mortgage industry as a whole, MBA estimates the purchase share at 74 percent in the second quarter.
“After an exceptionally weak start to the year, production profitability improved in the second quarter as volume picked up from the spring home buying season,” said MBA Vice President of Industry Analysis Marina Walsh. “But profits were down on a year-over-year basis and fell below typical second quarter results. When measured in basis points, pre-tax net production income reached its lowest level for any second quarter since the inception of our report in 2008. Mortgage originators evidently responded to first quarter losses by reducing their expenses in the second quarter, as production expenses dropped by over $1,000 per loan.  However, production revenues declined as competition for loans stiffened, negating a portion of these cost-cutting efforts.”

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