Independent Mortgage Banks (IMB) and mortgage subsidiaries of chartered banks reported a net gain of $2,023 on each loan they originated in the second quarter of 2021. This is much lower than the reported $3,361 net gain on each loan in the first quarter of 2021, according to Mortgage Banker Association’s (MBA) Quarterly Mortgage Bankers Performance Report.
Overall, net production profits dropped to their lowest level since the first quarter of 2019, but still remain above the historic quarterly average. MBA's Vice President of Industry Analysis, Marina Walsh, said, “Competition stiffened, production volume declined, and the market began to shift towards more purchase activity and less refinances. The result for mortgage lenders was a combination of lower revenues and higher expenses.”
The MBA performance report found that the purchase share of total originations, by dollar volume, increased to 57% in the second quarter of 2021, compared to 39% in the first quarter. The MBA estimates that the purchase share was at 44% for the entire mortgage industry in the second quarter of 2021.
Walsh continued to state that production revenues amongst lenders have declined for the third consecutive quarter, while per loan production expenses have increased for the fourth consecutive quarter. “This is a strong indication that the industry is moving away from the record-high profits of 2020,” Walsh said.
MBA’s Quarterly Mortgage Bankers Performance Report states that total production revenue fell to 375 basis points in the second quarter from 408 basis points in the first quarter. Production revenues per loan decreased to $10,691 per loan in the second quarter from $11,325 per loan in the first quarter. Meanwhile, total loan production expenses increased to $8,668 per loan in the second quarter, up from $7,964 per loan in the first quarter.
Walsh also commented on the decline in servicing profitability, due to mortgage servicing right (MSR) markdowns and increasing operating expenses. Looking at both servicing and production operations, 85% of firms reported overall profitability in the second quarter of 2021, compared to 97% in the first quarter.
Amongst the other key findings in MBA’s Quarterly Mortgage Bankers Performance Report, average production volume was reported to be $1.35 billion per company in the second quarter of 2021, down from $1.44 billion per company in the first quarter. The average volume of loans for each company in the second quarter was 4,615 loans, down from 4,879 loans in the first quarter.
Productivity increased to 3.7 loans originated per production employee per month in the second quarter of 2021, compared to 3.6 loans in the first quarter. Production employees encompass sales, fulfillment, and production support functions.
To read the full MBA Quarterly Mortgage Bankers Performance Report click the link provided.
