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Origination News | Lender Ranking | Fundings by Lender | Statistics
Quarterly residential mortgage production by lender. Subprime, Alt-A, home equity and conforming originations. Volume by quarter since 2003.

Home Lending Profits Plunge Despite Higher Revenues

Wholesalers see biggest quarterly loss

June 6, 2018

By Mortgage Daily staff

Although mortgage bankers pushed up quarterly revenues, rising expenses resulting from slowing originations dragged them into the red. Wholesale lenders suffered the most.

Average originations at independent mortgage banks and mortgage subsidiaries of chartered banks came to $0.440 billion in the first quarter.

Business slowed down compared to the preceding three-month period, when average mortgage production worked out to $523 billion.

Home lending was also off from $455 billion in the first-three months of last year.

The Mortgage Bankers Association provided the details in its Quarterly Mortgage Bankers Performance Report Q1 2018.

The findings were based on a survey of 343 companies, though only results for the 300 firms that participated in the current and fourth-quarter surveys were used for prior-quarter comparisons.

Average monthly closings per sales employee dropped to 4.8 loans from 5.9 units in the fourth-quarter 2017 and 5.0 loans in the first-quarter 2017.

Origination fees climbed to 53 basis points from 46 BPS in the fourth-quarter 2017 and 45 BPS in the first-quarter 2017. At companies that originated less than $0.05 billion, origination fees averaged 74 BPS. But fees plummeted to 32 BPS at companies with production in excess of $0.25 billion.

Despite rising origination fees, mortgage bankers suffered a 4-basis-point loss on first-quarter 2018 originations. Earnings swung from a 10-basis-point profit three months earlier and a year earlier.

The deterioration came even with a 17-basis-point quarter-over-quarter improvement in total revenues as personnel expense soared 20 BPS and overall expenses were up 31 BPS.

"In the first quarter of 2018, falling volume drove net production profitability into the red for only the second time since the inception of our report in the third quarter of 2008," MBA Vice President of Industry Analysis Marina Walsh said in an accompanying statement. "While production revenues per loan actually increased in the first quarter, we also reached a study-high for total production expenses at $8,957 per loan, as volume dropped." 

Home lenders with less than $0.05 billion in volume had a 37-basis-point loss, while firms with more than $0.25 billion in originations earned more than 2 BPS.

Net production income at retail lenders was 2 BPS, while companies that generate at least three-quarters of their business from the wholesale channel had a 29-basis-point loss.

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