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IMBs Taste Q1 Profitability
Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks saw an uptick in their profits during the first quarter, according to new data from the Mortgage Bankers Association (MBA).
During the first three months of this year, these lenders enjoyed a net gain of $285 on each loan they originated, a reversal from the reported loss of $200 per loan in the fourth quarter of 2018. The average pre-tax production profit was seven basis points (bps) in the first quarter, up from an average net production loss of 11 bps in the fourth quarter, while total production revenue increased to 393 bps in the first quarter from 351 bps in the fourth quarter. On a per-loan basis, production revenues hit a new peak of $9,584 per loan in the first quarter, up from $8,411 per loan in the fourth quarter. Another peak was reached with the average loan balance: $257,374 in the first quarter, up from $253,689 in the fourth quarter.
However, the average production volume for these lenders was $385 million per company in the first quarter, down from $440 million per company in the fourth quarter, while the volume by count per company averaged 1,571 loans in the first quarter, down from 1,799 loans in the previous quarter. And the purchase share of total originations, by dollar volume, decreased to 76 percent in the first quarter from 79 percent in the fourth quarter.
“Independent mortgage bankers experienced improvements in the first three months of the year. This was a welcoming sign following a very difficult end of 2018, in which profitability reached its lowest level since our survey’s inception in 2008,” said Marina Walsh, MBA’s vice president of industry analysis. “Mortgage application volume picked up strongly towards the end of the first quarter as rates dropped, increasing the pipeline of loans for the second quarter. Given the drop in rates, lenders also enjoyed a boost in secondary marketing gains. While we still saw a decline in overall production volume in the first quarter, revenues per loan rose to a study high, mitigating the increase in per-loan production expenses, also at a study high.”
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