Mortgage Bank Profits Flip Back to Positive

Per-loan mortgage banking profits bounced back in the second quarter after starting the year on a poor note.

The Mortgage Bankers Association (MBA) reported Tuesday that independent mortgage banks and mortgage subsidiaries of chartered banks posted a net profit of $954 on each loan originated in the year's second quarter. The report represents a significant turnaround from the first quarter, when mortgage banks took a net loss of $194 for each loan.

Marina Walsh, MBA's VP of industry analysis, said there were a few causes at play in the second-quarter rebound.

"The gains seen in the second quarter come after first quarter losses that were likely triggered by a variety of factors including the implementation of new Dodd-Frank regulations and extremely low origination volumes," Walsh said. "Some loan closings may have been pushed into the second quarter, resulting in an increase in profitability as per-loan production costs declined."

Average production volume came to $378 million per company in Q2, up more than $100 million—38 percent—over the prior quarter. Volume count averaged 1,676 per company compared to 1,238.

Production was boosted by a pickup in mortgage originations across the entire industry from a slow first quarter. Out of all mortgage loans made at the banks included in the survey, purchase loans accounted for 74 percent, up from 68 percent in the first quarter.

The jumbo share of total first mortgage originations also continued to rise, climbing to a new high at 7 percent, MBA reported. Other market reports from the group have indicated increasing interest in the jumbo market, with lenders opening up the credit box for that market to address demand.

Meanwhile, total loan production expenses, including commissions, compensation, equipment, and other costs, fell to $6,932 per loan, a decline of $1,093 from the first quarter—the biggest drop in costs in any single quarter since MBA began reporting.

Taking into account all business lines, MBA reported 81 percent of firms in its study posted pre-tax net financial profits in this year's second quarter, a major leap from the previous quarter's 54 percent but a decline from 92 percent for the same period last year.