Not only is the business on track for the highest origination volume in at least three years thanks to low interest rates, but lenders are also now making more money per loan than they’ve made in almost seven years.
A new report from the Mortgage
Bankers Association shows that independent mortgage banks and mortgage
subsidiaries of chartered banks saw a profit of $1,924 on each mortgage they
originated in the third quarter of 2019.
Now, lenders are making almost $2,000 per loan.
According to the MBA’s new Quarterly Mortgage Bankers
Performance Report, lender profits haven’t been this high since the fourth
quarter of 2012.
What’s driving the increase in profits? According to the
MBA, increased mortgage volume (especially refinances) and lower origination
costs are contributing to the rise in profitability.
“A surge in refinance activity and a healthy purchase market
led to robust mortgage volume in the third quarter, pushing up production
profits to a high not seen since the fourth quarter of 2012 ($2,256 per loan),”
said Marina Walsh, MBA’s vice president of industry analysis. “The increase in
profits was primarily driven by declining production expenses and higher loan
balances, which mitigated the effects of lower basis-point revenue.”
According to the MBA’s report, the average loan production
volume per company at the 338 companies that took part in the survey was $781
million in the third quarter, up from $601 million per company in the second
In terms of the number of loans originated, each company averaged 2,880 loans in the third quarter, up from 2,312 loans in the second quarter.
So total loan volume is up, and production costs are down.
According to the report, the total loan production expenses
(which includes commissions, compensation, occupancy, equipment, and other
production expenses and corporate allocations) fell to $7,217 per loan in the
third quarter, down from $7,725 per loan in the second quarter.
Production per employee was on the rise too, with an average
of 3.1 loans originated per production employee per month in the third quarter,
up from 2.3 loans per production employee per month in the second quarter. The
MBA defines production employees as those with sales, fulfillment and
production support functions.
And as other reports have shown, the increase in loan volume
is coming from refinances.
According to the MBA report, the refinance share of total
originations, by dollar volume, rose to 40% of all originations at the surveyed
companies. That’s up from just 26% in the second quarter.
Beyond that, the MBA report also shows that the average loan balance for first mortgages reached a study high of $276,053 in the third quarter, up from $268,520 in the second quarter.
Add all that up and one can see that it’s a pretty good time
to be in the mortgage business right now.
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