Decrease in quarterly profit of independent mortgage banks

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Independent mortgage banks’ profits have declined since the first quarter of the year, but remain above average, as the latest data show.

Independent mortgage banks, along with the mortgage subsidiaries of registered banks, reported a net profit of $ 2,023 on each loan they made in the second quarter of 2021, compared to a reported profit of $ 3,361 on a loan in the previous quarter. first quarter of the year, according to the quarterly report on the activities of mortgage bankers published by the Mortgage Bankers Association (MBA). This is the lowest net profit from manufacturing since Q1 2019, but the bottom line remained above the historic quarterly average, said Marina Walsh, CMB, MBA vice president of industry analysis.

“The competition intensified, the volume of production decreased, and the market began to shift towards more buying activity and less refinancing. The result for mortgage lenders has been a combination of lower income and higher costs. ”

Walsh added: “Manufacturing revenues have declined three quarters in a row, and manufacturing costs on a loan have increased four quarters in a row. This is a clear sign that the industry is moving away from record high profits in 2020. “

Walsh also noted a decline in service margins as a result of markdowns on mortgage service rights (MSRs) and higher operating costs. Combining manufacturing and service operations, 85% of companies posted overall profitability in the second quarter of 2021, up from 97% in the first quarter.

Additional key findings from the report are included (from MBA Resume):

  • The average profit from production before tax was 73 basis points (bps) in the second quarter of 2021, which is lower than the average net operating income of 124 basis points in the first quarter of 2021 and 167 basis points on an annualized basis. … The average quarterly profit from production before tax from the third quarter of 2008 to the most recent quarter was 55 basis points.
  • Average production was $ 1.35 billion per company in the second quarter, up from $ 1.44 billion per company in the first quarter. On average, the volume of loans per company in the second quarter was 4,615 loans, compared with 4,879 loans in the first quarter.
  • Total manufacturing revenue (fee and commission income, net secondary labeling and warehouse spread) declined to 375 basis points in the second quarter from 408 basis points in the first quarter. On a loan basis, proceeds from manufacturing declined to $ 10,691 per loan in the second quarter from $ 11,325 per loan in the first quarter.
  • Secondary marketing net income declined to 297 basis points in the second quarter from 331 basis points in the first quarter. On a loan, net secondary marketing income fell to $ 8,500 per loan in the second quarter from $ 9,283 per loan in the first quarter.
  • The share of purchases of the total number of works in dollar terms increased to 57% in the second quarter from 39% in the first quarter. For the mortgage industry as a whole, according to MBA estimates, the share of purchases in the second quarter of this year was 44%.
  • The average balance on the first mortgage rose to a new research high of $ 297,816 in the second quarter, up from $ 288,551 in the first quarter.
  • The average interest rate of return (loan closing before application) remained unchanged in the second quarter at 76%.
  • Total operating expenses on the loan — commissions, compensation, accommodation, equipment and other operating expenses and corporate appropriations — increased to $ 8,668 per loan in the second quarter, compared to $ 7,964 per loan in the first quarter. From the third quarter of 2008 to the last quarter, loan origination costs averaged $ 6,660 per loan.
  • In the second quarter, staff costs averaged $ 5,911 per loan, compared with $ 5,523 per loan in the first quarter.
  • Productivity increased to 3.7 credits per production worker per month in the second quarter from 3.6 credits per production worker per month in the first quarter. Production employees include sales, execution and production support functions.
  • Net financial income from servicing in the second quarter (excluding annuals) was $ 7 per loan, compared with $ 154 per loan in the first quarter. Operating income from servicing, which excludes amortization of MSR, profit / loss on valuation of service entitlements less hedging gains / losses and wholesale MSR gains / losses, was $ 71 per loan in the second quarter compared to $ 65 on a loan in the previous quarter. first quarter.
  • Including all business lines (both manufacturing and services), 85% of firms included in the study showed net income before taxes in the second quarter, up from 97% in the first quarter.

A full performance report is available on the website. MBA.org/performancereport



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