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The Mortgage Bankers Association's Quarterly Mortgage Bankers Performance Report revealed that independent mortgage banks and mortgage subsidiaries of chartered banks had a net gain of $3,738 on each loan they originated in the Q4 of 2020. Unfortunately, Q4's net gain is down from $5,535 per loan in the Q3 of 2020.
"Driven by strong borrower demand and a study-high in average loan balances, production volume for independent mortgage companies reached unprecedented heights, averaging close to $1.5 billion per company in the fourth quarter of 2020. Net production profits were at their third-highest levels, surpassed only by last year's second and third quarter," said Marina Walsh, the MBA's vice resident of Industry Analysis.
"While production profits were still incredibly strong in the fourth quarter, secondary marketing gains declined, resulting in an overall drop in production revenue. Also, production expenses increased for the second straight quarter, despite higher volume that historically reduces per-loan costs. Expenses rose by almost $500 per loan from the previous quarter, as personnel costs increased across sales, fulfillment, production support, and corporate overhead," added Walsh.
According to the report, combining both production and servicing operations, 95% of firms posted overall profitability for the fourth quarter of 2020. Additionally, the average pre-tax production profit was 137 basis points (bps) in the fourth quarter of 2020, down from an average net production profit of 203 bps in the third quarter of 2020, but up on a year-over-year basis from 46 basis points in the fourth quarter of 2019. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 53 basis points.
According to the MBA's report, the average production volume was $1.47 billion per company in the fourth quarter, up from $1.34 billion per company in the third quarter. The volume by count per company averaged 5,049 loans in the fourth quarter, up from 4,732 loans in last year's third quarter.
Meanwhile, the total production revenue decreased to 421 bps in the fourth quarter, down from 475 bps in the third quarter. On a per-loan basis, production revenues decreased to $11,676 per loan in the fourth quarter, down from $12,987 per loan in the third quarter.
Click here to view the MBA's full Quarterly Mortgage Bankers Performance Report.