According to the Mortgage Bankers Association's Annual Mortgage Bankers Performance Report, independent mortgage banks and mortgage subsidiaries of chartered banks in the U.S. made an average profit of $1,346 on each loan they originated in 2016, up from $1,189 per loan in 2015.
"Average production volume for companies in our Annual Performance Report rose in 2016, reflecting a larger industry trend of increasing volume in 2016 over 2015, based on MBA industry estimates," said Marina Walsh, MBA's Vice President of Industry Analysis.
"Average loan balances also rose, reaching a study-high $244,945 for first mortgages in 2016," Walsh continued. "This translated into higher revenues that reached a study-high $8,555 per loan in 2016. Yet production expenses also reached a study-high, at $7,209 per loan, and offset a portion of these revenue improvements. The net result was a slight increase in overall net production income."
"Mortgage lenders with servicing portfolios experienced significant fluctuations in the valuation of their mortgage servicing rights related to corresponding interest rate fluctuations during 2016. Most servicers reported net servicing financial losses in the first half of the year, followed by recoveries by the end of the year." "Including both production and servicing operations, 94 percent of the firms in the study posted overall pre-tax net financial profits in 2016, from 92 percent 2015."
Key findings of MBA's Annual Mortgage Bankers Performance Report include:
Average production volume was $2,679 million (11,161 loans) per company in 2016, compared to $2,405 million (9,906 loans) per company in 2015. On a repeater company basis, average production volume was $2,859 million (11,881 loans) in 2016, compared to $2,254 million (9,604 loans) in 2015. For the mortgage industry as whole, MBA estimates production volume at $1.89 trillion in 2016, from $1.68 trillion in 2015.
In basis points, the average production profit (net production income) was 58 basis points in 2016, compared to 52 basis points in 2015. In the first half of 2016, net production income averaged 61 basis points, then dropped to 55 basis points in the second half of 2016. Since the inception of the Annual Performance Report in 2008, net production income by year has averaged 55 bps ($1,127 per loan).
The purchase share of total originations, by dollar volume, decreased slightly to 62 percent in 2016, from 64 percent in 2015. For the mortgage industry as whole, MBA estimates the purchase share also decreased slightly to 52 percent in 2016, from 54 percent in 2015.
The average loan balance for first mortgages reached a study-high of $244,945 in 2016, from $242,480 in 2015. This is the 7th consecutive year of rising loan balances on first mortgages.
Total production revenues (fee income, net secondary marking income and warehouse spread) were 366 basis points in 2016, compared to 359 bps in 2015. On a per-loan basis, production revenues were $8,555 per loan in 2016, from $8,234 per loan in 2015.
Total loan production expenses - commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations - increased to $7,209 per loan in 2016, up from $7,046 in 2015.
Personnel expenses averaged $4,801 per loan in 2016, up from $4,699 per loan in 2015.
Productivity was 2.4 loans originated per production employee per month in 2016, up from 2.2 in 2015. 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 $34 per loan in 2016, from $73 per loan in 2015. Most servicers posted net servicing financial losses in the first half of 2016 because of heavy MSR amortization and valuation losses, but recovered in the last quarter of the year.
Including all business lines, 94 percent of the firms in the study posted pre-tax net financial profits in 2016, up from 92 percent in 2015. In the first half of 2016, 84 percent of reporting firms posted pre-tax financial profits, compared to 93 percent in the second half of 2016.