Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net production profit of $727 per loan in the first quarter of 2026, up slightly from $674 per loan in the fourth quarter of 2025, according to the Mortgage Bankers Association’s (MBA) latest Quarterly Mortgage Bankers Performance Report.
Measured in basis points, however, profitability remained largely unchanged. Lenders posted an average pre-tax production profit of 16 basis points in the first quarter, compared to 17 basis points in the prior quarter.
“Average production profits in the first quarter of 2026 remained relatively flat at 16 basis points, despite a decline in production volume from the previous quarter,” said Marina Walsh, CMB, MBA’s vice president of industry analysis. “Production costs grew by close to $800 per loan, but increases in production revenues offset these additional costs.”
Rising Costs, Higher Revenues
Total production revenue — including fee income, net secondary marketing income, and warehouse spread — increased to 353 basis points, up from 340 basis points in the fourth quarter. On a per-loan basis, revenue rose to $12,626, compared to $11,776.
At the same time, total loan production expenses climbed to 336 basis points, up from 323 basis points. Per-loan costs increased to $11,898, compared to $11,102 in the prior quarter.
The data underscores a key dynamic for mortgage professionals: margin stability is increasingly dependent on revenue gains keeping pace with rising fulfillment and personnel costs.
Volume Slips As Purchase Market Dominates
Average production volume declined to $621 million per company in the first quarter, down from $643 million in the fourth quarter. Loan count per company also fell, averaging 1,729 loans, down from 1,973 in the prior quarter.
Purchase activity continued to drive production. The purchase share of first mortgage originations reached 65% by dollar volume, compared to an estimated 60% for the broader mortgage industry.
Average loan balances also increased, with first mortgages rising to $387,881 and total mortgages (including seconds and HELOCs) reaching $371,648.
Servicing Income Rebounds
Servicing provided a meaningful boost to overall performance during the quarter. Servicing net financial income rose to $77 per loan serviced, up from $13 in the fourth quarter.
Servicing operating income — which excludes MSR valuation changes and other items — increased to $93 per loan serviced, compared to $90 in the prior quarter.
“Servicing net income improved during the first quarter, as markdowns on mortgage servicing rights slowed,” Walsh said.
Most Lenders Remain Profitable — But Gaps Persist
Including both production and servicing operations, 76% of firms reported pre-tax net financial profits in the first quarter, up from 68% in the fourth quarter of 2025.
Walsh noted that while most lenders are back in the black, performance gaps remain significant across the industry.
“Still, disparities between the top and bottom performers remain wide,” she said.
The results build on trends highlighted in MBA’s annual performance report released last month, which showed IMBs posted their strongest annual profitability in four years during 2025, even as rising wages, third-party charges, and elevated origination costs continued to pressure margins.
What It Means
For LOs, the report reinforces a familiar reality in the current rate environment:
- Margins remain tight, even as profitability stabilizes
- Cost control and operational efficiency are critical to maintaining profitability
- Purchase-driven volume continues to dominate production strategies
- Servicing income is playing a larger role in overall lender performance
As production volumes fluctuate, lenders that can balance rising costs with consistent revenue execution, while leveraging servicing where possible, are best positioned to sustain profitability.
