Independent Mortgage Banks See Quarterly Decline in Net Profits
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Independent Mortgage Banks See Quarterly Decline in Net Profits

March 24, 2020
Despite a rising inventory from one year earlier, November’s home sales fell 6.9 percent year-over-year and were down by 10.1 percent from October, according to new data from RE/MAX
Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $1,182 on each loan they originated in the fourth quarter of 2019, down from a reported gain of $1,924 per loan in the third quarter of 2019, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.
 
MBA’s report found that despite a quarterly decline in net production profits, IMBs had the most profitable fourth quarter since 2012. Additionally, 84 percent of the production and servicing respondents in the survey were profitable–also the highest percentage for a fourth quarter since 2012.
 
“With loan volume at elevated levels, IMBs had a strong close to 2019. Net production profit was a healthy 46 basis points, up from the fourth quarter average of 35 basis points since the survey’s inception in 2008,” said Marina Walsh, MBA’s vice president of industry analysis. “Typically, the second and third quarters perform better than the first and fourth quarters, and last year was no different. A combination of higher per-loan production expenses and lower secondary marketing income affected quarterly profitability. Firms added approximately 10 percent more employees last quarter, and slowing rate locks towards the end of the year led to less secondary marketing. We continue to closely monitor how the fallout from the spread of the Coronavirus will affect the various, important business functions of IMBs.”
 
Key findings of MBA’s fourth quarter of 2019 Quarterly Mortgage Bankers Performance Report include:
 
►The average pre-tax production profit was 46 basis points (bps) in the fourth quarter, down from an average net production profit of 74 bps in the third quarter of this year.
►Average production volume was $800 million per company in the fourth quarter, up from $781 million per company in the third quarter. The volume by count per company averaged 2,947 loans in the fourth quarter, up from 2,880 loans last quarter.
►Total production revenue (fee income, net secondary marking income and warehouse spread) decreased to 337 bps in the fourth quarter, down from 349 bps in the third quarter. On a per-loan basis, production revenues decreased to $8,707 per loan in the fourth quarter, down from $9,142 per loan in the third quarter.
►The purchase share of total originations, by dollar volume, decreased to 56 percent in the fourth quarter from 60 percent in the third quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 45 percent last quarter.
►The average loan balance for first mortgages decreased to $271,972 in the fourth quarter, down from a study high of $276,053 in the third quarter.

 
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