Independent mortgage banks see net profit in second quarter

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net profit in the second quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.

Specifically, IMBs generated pre-tax net profit of $693 on each loan they originated in the second quarter of 2024, an increase from the reported loss of $645 per loan in the first quarter of 2024,

“Net production income was positive in the second quarter of 2024 – a welcome sign after eight consecutive quarters of net production losses,” Marina Walsh, MBA’s vice president of industry analysis, said. “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.”

Among the key findings, the report said:

• Roughly 78 percent of the firms in the report posted pre-tax net financial profits in the second quarter of 2024, up from 59 percent in the first quarter of 2024.
• The average pre-tax production profit was 17 basis points (bps) in the second quarter of 2024, compared to an average net production loss of 25 bps in the first quarter of 2024 and a loss of 18 basis points one year ago.
• The average production volume was $492 million per company in the second quarter, up from $384 million per company in the first quarter. The volume by count per company averaged 1,503 loans in the second quarter, up from 1,193 loans in the first quarter.
• Total production revenue decreased to 347 bps in the second quarter, down from 371 bps in the first quarter. Average quarterly production revenue, from the third quarter of 2008 to the most recent quarter, is 347 basis points.
• The purchase share of total originations, by dollar volume, was 86 percent. For the entire mortgage industry, MBA estimates the purchase share was at 78 percent in the second quarter of 2024.
• The average loan balance for first mortgages increased to $356,993 in the second quarter, up from $345,761 in the first quarter.
• Total loan production expenses decreased to 330 basis points in the second quarter of 2024 from 395 basis points in the first quarter of 2024. Per-loan costs decreased to $10,806 per loan in the second quarter, down from $12,593 per loan in the first quarter of 2024.
• Servicing net financial income for the second quarter was $69 per loan, down from $82 per loan in the first quarter. Servicing operating income was $88 per loan in the second quarter, down from $93 per loan in the first quarter.

“Almost 80 percent of mortgage companies in the sample posted overall profits, including both production and servicing business lines. After two of the most challenging years in the mortgage business, many companies are seeing light at the end of the tunnel, Walsh said.”

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