Independent mortgage bankers pulled back into the black during the second quarter after seeing the worst quarter for profitability in years during the first quarter.

During the first quarter this year, lenders struggled in the rising mortgage rate environment, reporting negative profits for the first time since Dodd-Frank compliance brought down profits in 2014.

But now, the Mortgage Bankers Association reported lenders are seeing net gains once again, saying the average independent mortgage banker and mortgage subsidiaries of chartered banks reported a net gain of $580 on each loan they originated in the second quarter. This is up from a loss of $118 per loan during the first quarter.

“After an exceptionally weak start to the year, production profitability improved in the second quarter as volume picked up from the spring home buying season,” said Marina Walsh, MBA vice president of industry analysis. “But profits were down on a year-over-year basis and fell below typical second quarter results.”

“When measured in basis points, pre-tax net production income reached its lowest level for any second quarter since the inception of our report in 2008,” Walsh said.

The average pre-tax production profit was 21 basis points in the second quarter of 2018, up from a net production loss of eight basis points in the first quarter this year. However, this was still down from the 24 basis points profit in the second quarter of 2017.

Due to the spring home buying season, origination volume increased to $531 million per company in the second quarter, up from $450 million in the first quarter this year. By loan count, this equaled about 2,180 loans per company, up from 1,866 loans.

Mortgage lenders worked to lower their expenses after the first quarter, successfully bringing expenses down by more than $1,000 per loan. However, other factors still weighed heavily against them.

“Mortgage originators evidently responded to first quarter losses by reducing their expenses in the second quarter, as production expenses dropped by over $1,000 per loan,” Walsh said. “However, production revenues declined as competition for loans stiffened, negating a portion of these cost-cutting efforts.”

Total loan production expenses including commissions, compensation, occupancy, equipment and other expenses and corporate allocations decreased to $7,877 per loan in the second quarter. This is down from a study high of $8,957 per loan in the first quarter. Historically, expenses have averaged about $6,266 per loan.

The MBA’s Quarterly Mortgage Bankers Performance Report also showed the purchase share of total originations, by dollar volume, increased to 81% in the first quarter this year, the highest level since the study began in the third quarter of 2008.

This could be due to the constantly rising home prices. The report showed in the second quarter, the average loan balance for first mortgage also reached a study high of $255,136, up from $249,041 in the first quarter this year.