Show me less money? MBA reports mortgage profits nearly slashed in half

Not good at all

The Mortgage Bankers Association just released some terrible news.

According to its Annual Mortgage Bankers Performance Report, independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $711 on each loan they originated in 2017, down from $1,346 per loan in 2016.

 That only puts half a dinner on the table and this is not good at all.

"Production profits dropped by almost half in 2017 as rate-term refinancings diminished and the overall average production volume dropped," said MBA Vice President of Industry Analysis Marina Walsh, in a statement.

"Production revenues per loan were up slightly for the year, as higher loan balances mitigated the effects of competitive pressures," Walsh added. "However, production expenses grew in all categories– sales, fulfillment, production support and corporate."

There are some bright spots, as Walsh noted for those mortgage bankers holding mortgage servicing rights, higher loan balances drove up per-loan servicing fees and helped overall profitability.

However, including both production and servicing operations, 80% of the firms in the study posted overall pre-tax net financial profits in 2017, down from 94% in 2016, she said.

Other key report findings:

  • Average production volume fell to $2.13 billion (8,882 loans) per company in 2017, compared to $2.68 billion (11,106 loans) per company in 2016.
  • Average production profit (net production income) fell to 31 basis points in 2017, compared to 58 basis points in 2016. In the first half of 2017, net production income averaged 36 basis points, then dropped to 26 basis points in the second half.
  • Total loan production expenses–commissions, compensation, occupancy, equipment and other production expenses and corporate allocations–increased to $8,082 per loan in 2017, up from $7,209 in 2016.
3d rendering of a row of luxury townhouses along a street

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