Independent mortgage banks get back in the black
Independent mortgage banks and mortgage subsidiaries of chartered banks realized a net gain of $285 per loan in the first quarter, contrasting net losses in comparable periods last year, according to the Mortgage Bankers Association.
The gain marked a step in the right direction following net losses of $200 in the fourth quarter of 2018 and $118 in the first quarter of last year. Last year, mortgage bankers were only profitable during the seasonally stronger second and third quarters.
But pretax production profit reached 7 basis points at the start of this year, which is up from an average loss of 11 basis points in the fourth quarter and 15 basis points from 1Q18, according to the MBA's Quarterly Mortgage Bankers Performance Report.
"Independent mortgage bankers experienced improvements in the first three months of the year. This was a welcoming sign following a very difficult end of 2018, in which profitability reached its lowest level since our survey's inception in 2008," Marina Walsh, the MBA's vice president of industry analysis, said in a press release.
"Mortgage application volume picked up strongly toward the end of the first quarter as rates dropped, increasing the pipeline of loans for the second quarter. Given the drop in rates, lenders also enjoyed a boost in secondary marketing gains," she said.
Mortgage activity still lagged as overall production volume declined in the first quarter.
Average production volume declined to $385 million per company in the first quarter, down from $440 million in the previous quarter. Volume by loan count averaged 1,571, compared to 1,799 in 4Q18.
But total production revenue, which achieved a study high, helped offset per-loan production expenses, which also peaked.
Total production revenue increased to 393 basis points from 351 in the prior quarter. Production revenue per loan reached a high of $9,584 in 1Q19, up from $8,411 at the end of 2018.