For the first time in two years, independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net profit, according to the Mortgage Bankers Association’s (MBA) latest quarterly mortgage bankers performance report.
In the second quarter, IMBs made an average of $693 on each loan they originated, marking a welcome sign for originators who lamented a reported $645 loss per loan originated in the first quarter of the year.
“Net production income was positive in the second quarter of 2024 – a welcome sign after eight consecutive quarters of net production losses,” MBA Vice President of Industry Analysis Marina Walsh said in a press release. “With a pickup in quarterly volume, productivity, and closings-to-applications pull-through, production costs dropped by about $1,800 per loan. These developments contributed to better net results, even as production revenues decreased from the previous quarter.”
Seventy-eight percent of IMBs’ both production and servicing business lines reported second-quarter pre-tax net financial profits, MBA reported. This represents a significant increase from 59 percent in the previous quarter. The average pre-tax production profit rose to 17 basis points (bps) compared to the loss of 25 bps in the first quarter and a loss of 18 bps in the same quarter a year earlier.
“After two of the most challenging years in the mortgage business, many companies are seeing light at the end of the tunnel,” Walsh said.
Historically, the average quarterly pre-tax production profit, spanning from the third quarter of 2008 to the most recent quarter, has stood at 42 bps. During this period, the average production volume per company increased to $492 million, up from $384 million in the first quarter, with the number of loans per company averaging 1,503, compared to 1,193 in the previous quarter. However, total production revenue – including fee income, net secondary marketing income, and warehouse spread – dropped to 347 bps in the second quarter, down from 371 bps the quarter prior.