Independent home lenders turned quarterly losses into profits by cutting expenses, though stiffer competition had income down by half from a year earlier. Wholesale lenders took a beating.
The average independent mortgage banker, including mortgage subsidiaries of chartered banks,
earned 22 basis points in profit on each loan closed during the second quarter.
Earnings per loan swung from a 4-basis-point loss in the previous quarter. But mortgage production income sank from 46 BPS during the same three months of last year.
Details about production profits were presented by the
Mortgage Bankers Association in its Quarterly Mortgage Bankers Performance Report Q2 2018. The report can be purchased by MBA members for $175, while the cost is $300 for non-members.
Although
343 firms participated in the survey, data from just the 312 that participated in both the current and prior-quarter surveys was used for comparison.
The quarter-over-quarter improvement was primarily the result of
a reduction in direct loan production expenses — which were cut to 308 BPS from 382 BPS. Walsh noted that “originators evidently responded to first quarter losses by reducing their expenses.”
Year-over-year deterioration reflected a 26-basis-point drop in revenues, as well as stiffer competition.
“When measured in basis points, pre-tax net production income reached its lowest level for any second quarter since the inception of our report in 2008,” MBA Vice President of Industry Analysis Marina Walsh said in an accompanying news release.
Faring worst during the most-recent period were the smallest organizations, those with less than $0.050 billion in quarterly production, which suffered an 8-basis-point loss. The best results were from firms that closed between $0.100 billion and $0.250 billion, with nearly 27 BPS in profit.
Retail originations continued to be the most profitable with 34 BPS in production income. Firms that generated business both through the retail and wholesale channels earned just 9 BPS, and wholesalers — those with at least three-quarters of their production coming from wholesale lending — had a 19-basis-point loss.
Average originations at all participating lenders were 2,289 loans for $0.556 billion in the second quarter, more than 1,861 loans for $0.448 billion three months earlier and 2,177 loans for $0.526 billion one year earlier.
Average monthly closing per sales employee rose to 5.5 units from 4.9 units in the first quarter but came up short versus 5.8 units in the second-quarter 2017.
