Mortgage lenders see lower returns but still above average

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Independent mortgage banks and subsidiary banks’ profits fell to a two-year low in the second quarter, reflecting both lower margins and a slowdown in production, according to the Mortgage Bankers Association.

The Mortgage Banks’ quarterly performance report reports IMB’s net income of $ 2,023 on loans, or 73 basis points, in the second quarter of 2021, up from $ 3,361 and 124 basis points in the previous quarter. first three months of the year… That number saw an even bigger drop compared to the second quarter of 2020, a period of increased economic activity in the mortgage business, when net income was $ 4,548 and 167 basis points per loan.

“Revenue from manufacturing declined three quarters in a row, and production costs per loan increased four quarters in a row. This is a clear sign that the industry is moving away from record high profits in 2020, ”Marina Walsh, MBA vice president of industry analysis, said in a press statement.

But Walsh noticed that even as profits fell, the profit on the loan still above historic quarterly average 55 basis points since 2008, when the study was introduced. In addition, basis point gains rarely hit the three-digit numbers recorded in each of the previous four quarters.

“The competition intensified, the volume of production decreased, and the market began to shift towards an increase in purchasing activity and a decrease in refinancing. The result for mortgage lenders has been a combination of lower incomes and higher costs, ”Walsh said.

Average production was $ 1.35 billion per company, up from $ 1.44 billion in the first quarter, with total loans issued per lender averaging 4,615 units in the second quarter, up from 4,879 loans in the previous quarter.

Among the expenses that influenced the amount of profit as a result of the increase purchasing activity there were commissions, compensation, accommodation, equipment, and other expenses and corporate appropriations. In the second quarter, they increased to $ 8,668 per loan, up from $ 7,964 in the previous three months. Historically, these costs averaged $ 6,660 per quarter. Staff costs accounted for the bulk of expenses, averaging $ 5,911 per loan, up from $ 5,523 in the first quarter.

The share of IMB purchases in dollar terms was 57% for the quarter, up from 39% in the first quarter, while in the industry as a whole, purchases accounted for 44% of the volume, up from 29%, respectively.

While demand has eased due to rising home prices and few homeowners looking to refinance, Freddie Mac raised the look at the origin during the year with the expectation of an increase in both purchase and refinancing segments.

The decline in IMB’s performance was driven by a decrease in net profit from servicing, mainly due to a decrease in the fair value of rights to service mortgage loans and an increase in operating expenses. Net financial income from servicing in the second quarter was $ 7 per loan, up from $ 154 in the first three months of 2021. But the segment’s operating profit, which excludes amortization, any gains or losses in the valuation of service entitlements, less hedges and gains or losses. MSR wholesale losses were $ 71 per loan in the second quarter, compared with $ 65 per loan in the first quarter.

The MBA data is compiled from surveys of 361 independent mortgage banks or home loan subsidiaries, registered banks. Taking into account the lending and servicing segments, 85% of companies reported net income in the second quarter, up from 97% in the first quarter.



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