With many still originating in the red, independent mortgage banks (IMBs) reported improved profitability in the first quarter of this year, losing just one-third of what they did per loan at the end of 2023.
A loss of $645 per loan in Q1 2024 is down from Q4 2023’s loss of $2,109 per loan, according to the Mortgage Bankers Association’s (MBA) newly-released Quarterly Mortgage Bankers Performance Report.
“While the first quarter of 2024 marks the eighth consecutive quarter of net production losses, these losses were less severe than the previous two quarters,” said Marina Walsh, MBA’s vice president of industry analysis. “In basis points, production revenue rose above the historical average and production costs declined. This led to an improvement in the production bottom line by almost 50 basis points during the quarter.”
Servicing profitability also improved, as Walsh went on to point out.
“Including both the production and servicing business lines, close to 60 percent of mortgage companies were profitable in the first quarter of this year – the highest level in eight quarters,” she said.
Companies posting pre-tax net financial profits in the first quarter of 2024 is up from 29% in the fourth quarter of 2023.
The average pre-tax production loss was 25 basis points (bps) in the first quarter of 2024, compared to an average net production loss of 73 bps in the fourth quarter of 2023, and a loss of 68 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 42 basis points.
The average firm’s production volume was $384 million in Q1, up from $359 million in the fourth quarter. The volume by count per company averaged 1,193 loans in the first quarter, up from 1,170 loans in the fourth quarter.
Total production revenue (fee income, net secondary marketing income and warehouse spread) increased to 371 bps in the first quarter, up from 334 bps in the fourth quarter. Average quarterly production revenue, from the third quarter of 2008 to the most recent quarter, is 347 basis points. On a per-loan basis, production revenues increased to $11,947 per loan in the first quarter, up from $10,376 per loan in the fourth quarter.
The purchase share of total originations, by dollar volume, was 85%, while the MBA estimates the purchase share for the mortgage industry as a whole was at 77% in Q1 2024.
The average loan balance for first mortgages increased to $345,761 in the first quarter, up from $336,757 in the fourth quarter.
Total loan production expenses decreased to 395 basis points in Q1 2024 from 407 basis points in Q4 2023. However, per-loan costs increased to $12,593 per loan in the first quarter, up from $12,485 per loan in the fourth quarter of 2023. From the first quarter of 2008 to last quarter, loan production expenses have averaged $7,472 per loan.
