Small mortgage banking companies hustled in the second quarter to go after the mortgage purchase business and remained profitable as refinancings dried up.
As a result, the 310 originators that responded to the Mortgage Bankers Association's quarterly performance survey didn't experience a drop in production—and per loan profitability jumped 66%.
The average firm surveyed by MBA funded $173 million during the quarter, up nearly 6% from the first quarter.
“They captured the purchase activity that many of the larger players haven't,” said Marina Walsh, MBA's associate vice president of industry analysis.
Industrywide, originations fell 23% from the first quarter to $270 billion in the second quarter, according to preliminary funding figures compiled by National Mortgage News and the Quarterly Data Report.
The MBA surveys its non-bank members (independents) and the mortgage subsidiaries of banks and thrifts for its quarterly performance report.
Those independents made an average profit of $575 per origination in the second quarter, a nice bump from the first quarter— but a significant decline from two years ago when the average gain was $1,358.
The trade group attributed the better profit performance, in part, on secondary marketing gains which came courtesy of improved spreads between 10-year Treasuries and 30-year fixed-rate mortgages.
In the second quarter, the average independent lender had a secondary market gain of 210 basis points compared to 201 basis points in the previous quarter. In terms of dollars, the lender took in revenue of $4,006 per loan from a secondary market transaction.
Walsh points out that these independents had a 73% pull-through rate (taking a loan from application to closing). Bank subsidiaries had a 66% pull-through rate. Purchase loans are the “toughest loans to do,” she noted.
As of June 20, retail lending accounted for 83% of originations compared to 17% going through wholesale/correspondent channels. During the second quarter of 2010, retail lending accounted for 82% of originations compared to 18% for wholesale/correspondent channels. (Again, these numbers only reflect the activity of firms surveyed by MBA.)
Walsh noted that some of the independents remain “committed to the broker channel.”
