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Mortgage

Average IMB lost $82 on each loan originated in Q2

Combining both production and servicing operations, only 57% of companies in the MBA report were profitable 

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $82 on each loan they originated in the second quarter. It’s a significant drop from the first quarter, when lenders saw a gain of $223 per loan, according to the Mortgage Bankers Association (MBA). The MBA attributed the losses to a rate rising environment and lack of housing inventory. 

“The second quarter of 2022 did not yield the usual Spring seasonal pick-up in purchase activity, in an environment of higher mortgage rates, low housing inventory, and affordability challenges,” said Marina Walsh,  the trade organization’s vice president of industry analysis.

June saw the largest single-month increase of for-sale inventory in 12 months and while it saw a record-low price appreciation, that wasn’t enough to stop a cool down in the housing market, according to a separate report from Black Knight.

Lower volume and revenues and higher costs relative to the first quarter led IMBs and mortgage subsidiaries of chartered banks to report the lowest average pre-tax net production income per loan since the fourth quarter of 2018, Walsh said. 

The average pre-tax production loss was 5 bps in the second quarter of 2022, down from an average net production profit of 5 bps in the first quarter of 2022. Compared with the same period last year, it was a decline from a profit of 73 bps. 

For context, the average quarterly pre-tax production profit from the third quarter of 2008 to the second quarter of 2022 is 54 bps. 


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On average, IMBs generated $705 million in origination volume in the second quarter, down from $808 million in the previous quarter. 

Total production revenue for IMBs, which includes fee income, net secondary marking income and warehouse spread, decreased to 335 bps in the second quarter, down from 350 bps a quarter prior. On a per-loan basis, production revenues declined to $10,855 per loan in the second quarter,  marginally down from $10,861 per loan in the first quarter.

The average loan balance for a first mortgage climbed to a new high of $337,130 in the second quarter, rising from $324,368 in the previous quarter. 

With mortgage rates climbing about two percentage points since the beginning of the year, purchase share of total originations by dollar volume among IMBs and mortgage subsidiaries of chartered banks jumped to 81% from the previous quarter’s 63%. The MBA estimates purchase mortgages were 70% of the total loans for the industry in the same period.

Servicing net financial income for the second quarter, without annualizing, was at $133 per loan, down from $242 per loan in the first quarter. 

The sale of MSRs does not directly impact earnings as a revenue stream, but the conversion of MSRs into cash via sales deals bolsters a lender’s cash flow and overall liquidity.

Servicing operating income, which excludes MSR amortization, gains or loss in the valuation of servicing rights net of hedging gains or losses and gains or losses on the bulk sale of MSRs, was $97 per loan in the second quarter, up from $94 per loan in the first quarter.

“Combining both production and servicing operations, only 57 percent of the companies in our report were profitable,” said Walsh. 

Of the 347 companies that reported production data for the second quarter of 2022, 84% were IMBs and the remaining 16% were subsidiaries and other non-depository institutions. 

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