Mortgage Production Profits Reach Highs

Mortgage Production Profits Reach Highs

Pandemics aside, it’s a good time to be a loan originator. Net gains per loans have reached their highest levels since the Mortgage Bankers Association started tracking the profits back in 2008. All but 4% of companies reported earning a profit for the quarter.

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $4,548 on each loan they originated in the second quarter of 2020, up from a reported gain of $1,600 per loan in the first quarter of 2020, according to the Mortgage Bankers Association’s most recent Quarterly Mortgage Bankers Performance Report.

Key findings of the quarterly report include:

• The average pre-tax production profit was 167 basis points (bps) in the second quarter, up from an average net production profit of 61 bps in the first quarter of 2020.

• Average production volume was $1.02 billion per company in the second quarter, up from $728 million per company in the first quarter. The volume by count per company averaged 3,631 loans in the second quarter, up from 2,654 loans last quarter.

• Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 429 bps in the second quarter, up from 362 bps in the first quarter. On a per-loan basis, production revenues increased to $11,686 per loan in the second quarter, up from $9,582 per loan in the first quarter.

• Net secondary marketing income increased to 341 bps in the second quarter, up from 283 bps in the first quarter. On a per-loan basis, net secondary marketing income increased to $9,355 per loan last quarter from $7,548 per loan in the first quarter.

• The purchase share of total originations, by dollar volume, decreased to 39% in the second quarter from 52% in the first quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 37% in this year’s second quarter.

• The average loan balance for first mortgages increased to a new study high of $282,309 in the second quarter, up from $276,291 in the first quarter.

• The average pull-through rate (loan closings to applications) was 71% in the second quarter, up from 67% in the first quarter.