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U.S. Mortgage Banker Profits and Production Volume Down in 2018

U.S. Mortgage Banker Profits and Production Volume Down in 2018


The Mortgage Bankers Association is reporting in its Annual Mortgage Bankers Performance Report that Independent mortgage banks and mortgage subsidiaries of chartered U.S. banks made an average profit of $367 on each loan they originated in 2018, down from $711 per loan in 2017.

"Despite a healthy economy in 2018, the mortgage market suffered, as rate hikes hurt refinancing volume and low housing inventories priced some potential homebuyers out of the purchase market," said Marina Walsh, MBA's Vice President of Industry Analysis. "For mortgage companies, there was the perfect storm of lower production revenues combined with rising expenses, which together contributed to the lowest net production income per loan since 2008. Production revenues per loan dropped despite study-high loan balances in 2018. At the same time, production expenses per loan grew to a study-high of $8,278 per loan last year." 

Added Walsh, "For those holding mortgage servicing rights (MSR), it was the silver lining that boosted overall profitability. Including both production and servicing operations, 69 percent of the firms posted overall pre-tax net financial profits in 2018, compared to only 47 percent of firms with net servicing income excluded."

Key findings of MBA's 2018 Annual Mortgage Bankers Performance Report

  • Average production volume was $2.0 billion (8,171 loans) per company in 2018, down from $2.13 billion (8,882 loans) per company in 2017. On a repeater company basis, average production volume was $2.07 billion (8,502 loans) in 2018, down from $2.11 billion (8,824 loans) in 2017. For the mortgage industry as whole, MBA estimates production volume at $1.64 trillion in 2018, down from $1.76 trillion in 2017.
  • In basis points, the average production profit (net production income) was 14 basis points in 2018, compared to 31 basis points in 2017. In the first half of 2018, net production income averaged 18 basis points, then dropped to 9 basis points in the second half of 2018. Since the inception of the Annual Performance Report in 2008, net production income by year has averaged 49 bps ($1,020 per loan).
  • The refinancing share of total originations (by dollar volume) decreased to 20 percent in 2018 from 25 percent in 2017. For the mortgage industry as a whole, MBA estimates the refinancing share last year decreased to 28 percent  from 35 percent in 2017.
  • The average loan balance for first mortgages reached a study-high of $251,084 in 2018, up from $245,500 in 2017. This is the 9th consecutive year of rising loan balances on first mortgages.
  • Total production revenues (fee income, net secondary marking income and warehouse spread) were 362 basis points in 2018, down from 379 bps in 2017. On a per-loan basis, production revenues were $8,645 per loan in 2018, down from $8,793 per loan in 2017.
  • Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations - increased to $8,278 per loan in 2018, up from $8,082 in 2017. 
  • Personnel expenses averaged $5,524 per loan in 2018, up from $5,346 per loan in 2017.
  • Productivity was 1.8 loans originated per production employee per month in 2018, down from 1.9 in 2017. Production employees include sales, fulfillment and production support functions.
  • Net servicing financial income, which includes net servicing operational income, as well as mortgage servicing right (MSR) amortization and gains and losses on MSR valuations, was $203 per loan in 2018, up from $64 per loan in 2017.
  • Including all business lines, 69 percent of the firms in the study posted pre-tax net financial profits in 2018, down from 80 percent in 2017. In the first half of 2018, 73 percent of reporting repeater firms posted pre-tax financial profits, compared to 55 percent in the second half of 2018.

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