Profits plummet for independent mortgage banks

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Independent mortgage banks and mortgage subsidiaries of chartered banks saw production profits tank in the fourth quarter of 2017, according to the Mortgage Bankers Association.

Independent mortgage banks and their subsidiaries reported a net gain of $237 per loan originated in the fourth quarter, down significantly from the $929 net gain reported for each loan originated in the previous quarter.

Production volume also dropped in the fourth quarter, averaging $505 million per company, down from $569 million per company in 3Q17.

"Production profits plummeted in the fourth quarter of 2017 compared to the third quarter of 2017," Marina Walsh, MBA's vice president of industry analysis, said in a press release. "Purchase volume was lower in the fourth quarter, in part due to normal seasonality. At the same time, there was no substantial pickup in refinancings."

By dollar volume, the purchase share of total originations decreased to 71% in the fourth quarter from 74% in the third quarter. The purchase share for the mortgage industry as a whole was 63% in the fourth quarter, according to MBA estimates.

Though cash-out refinances grew from 14% of overall production volume in the third quarter to 16% in the fourth quarter, rate-term refinances remained under 13% of overall production volume, as they were in the previous two quarters.

"The end result was lower overall volume and production expenses that grew to $8,475 per loan — the second highest level reported since the inception of our study in 2008. Production revenue per loan also dropped, despite the average loan balance reaching a study-high," said Walsh.

The average loan balance for first mortgages hit a peak of $254,291 in the fourth quarter, up from $251,109 in the previous quarter.

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Originations Refinance Purchase Mortgage Bankers Association