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Production Profits Increase for IMBs in Late 2021

According to the new data from the MBA's Quarterly Mortgage Bankers Performance Report, "independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks" reported a net gain of more than $2,500 on loans originated during Q3 2021. This was an increase over the previously reported Q2 2021 net gain of $2,023 per loan.

The MBA data notes that, accounting for "both production and servicing operations," 92% of firms posted profitability for Q3. That's up compared to 84% in Q2.

In a statement, Marina Walsh, CMB, MBA's VP of Industry Analysis, said, "Net production profit rebounded in the third quarter of 2021 after a drop-off in the second quarter, but was down more than half from the record profit one year ago. Production revenue was the difference-maker, increasing more than 20 basis points from the second quarter. However, production revenue was still down almost 80 basis points compared to a year ago."

Walsh also noted that per-loan production expenses reached the second-highest level ever reported, having continued a rise that has extended over five consecutive quarters.

"Rising sales costs that are often determined based on a percentage of loan balances was one primary factor for the increase in expenses," Walsh continued. "The average loan balance for first mortgages reached another study-high in the third quarter, passing the $300,000 threshold for the first time to over $308,000."

Other key datapoints from the MBA IMB report included:

  • Average pre-tax production profit was 89 basis points (bps) in Q3 2021 (Q2 2021 was 73 bps). This was down from 203 basis points year-over-year. "Average quarterly pre-tax production profit" is 56 basis points (from Q3 2008 to the most recent quarter).
  • Average production volume was $1.17 billion per company in Q3. This represents a drop from $1.35 billion per company in Q2. Average volume by count per company was 3,889 loans in Q3, down from 4,615 loans in Q2.
  • Purchase share of total originations (by dollar volume), increased to 59% in Q3, up from 57% in Q2.
  • Average loan balance for first mortgages increased to $308,237 in Q3, up from $297,816 in Q2. Per MBA, this was "a new study high."
  • Personnel expenses averaged $6,185 per loan in Q3. This was an increase from $5,911 per loan in Q2.

To read more of MBA's findings regarding IMB profits, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at demetria.lester@thefivestar.com.

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