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Independent Mortgage Banks Show Production and Profits Down

The Mortgage Bankers Association (MBA) released its Quarterly Mortgage Bankers Performance Report for Q1 of 2017 on Tuesday and disclosed that independent mortgage banks were having a rough start in the first quarter of 2017. Per loan, gains are down and production costs are up, resulting in lower net profits.

The first quarter saw a drop in net gains on loans originating during Q1 2017, which fell from $575 per loan originated in Q4 of 2016 to $225 per loan, under 50 percent its previous value. To be fair, volume by count per company was also down from 2,811 loans in Q4 to 1,944 in Q1.

The mean production volume was reported to be $455 million per company, a drop of $235 million from the 2016 Q4 value of of $690 million. Average loan balances for first mortgages also fell slightly to $242,949, down from $246,473.

Records were both set and broken in the first quarter of 2017. The average pre-tax net production profit set a record low of 10 basis points, down from 24 basis points in Q4 of 2016. Average basis points since 2008, when the Quarterly Mortgage Bankers Performance Report first started being published by the MBA, have been 51 basis points. The average pull through rate, which is the difference of loan closings to applications, dropped from a study high of 76 percent as reported at the end of 2016 to 70 percent this quarter.

Marina Walsh, MBA’s VP of Industry Analysis, provided her interpretation on the report’s data. “"The drop in overall production volume in the first quarter of 2017 resulted in the highest per-loan production expenses reported since inception of our study in the third quarter of 2008 … While higher production revenues mitigated a portion of the cost increase, production profitability nonetheless declined by more than half the previous quarter."

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