The Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report showed independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks saw an increase in production profits during the third quarter of 2021.
Combining production and servicing operations, 92 percent of firms posted overall profitability during this quarter, compared with 84 percent in the second quarter of 2021, the association stated. IMBs and subsidiaries stated they saw a net gain of $2,594 on each loan they originated in the third quarter of 2021, up from a reported gain of $2,023 per loan in the second quarter of 2021.
“Net production profit rebounded in the third quarter of 2021 after a drop-off in the second quarter, but was down more than half from the record profit one year ago,” Marina Walsh, MBA vice president of industry analysis, said in a release. “Production revenue was the difference-maker, increasing more than 20 basis points from the second quarter. However, production revenue was still down almost 80 basis points compared to a year ago.
“Per-loan production expenses continued to rise for the fifth consecutive quarter, reaching the second-highest level ever reported,” Walsh added. “Rising sales costs that are often determined based on a percentage of loan balances was one primary factor for the increase in expenses. The average loan balance for first mortgages reached another study-high in the third quarter, passing the $300,000 threshold for the first time to over $308,000.”
Per-loan production expenses increased to $ $9,140 per loan in the third quarter, up from $8,668 per loan in the second. The report showed average production volume was $1.17 billion per company in the third quarter, down from 1.35 billion the quarter before. Volume by count per company decreased quarter-over-quarter, from 4,615 to 3,889.
Despite these decreases, total production revenue, including fee income, net secondary marketing income and warehouse spread, increased 396 basis points (BPS), up from 375 the prior quarter.
The purchase share of total originations, by dollar volume, increased to 59 percent in the third quarter, up from 57 percent the quarter before. MBA estimated the purchase share was 46 percent for third quarter 2021.