There was bad news and good news for independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks during the first quarter of this year. The bad news: these entities reported a net loss of $1,972 on each loan they originated during the quarter, according to data from the Mortgage Bankers Association (MBA).
And the good news? This was an improvement from the reported loss of $2,812 per loan in the fourth quarter of 2022.
“A net production loss of 68 basis points in the first quarter of the year is an improvement over the record 99-basis-point loss reported in the fourth quarter of 2022,” said Marina Walsh, MBA’s vice president of industry analysis. “Conditions continue to be challenging for the industry, with now four consecutive quarters of production losses and nine consecutive quarters of volume declines. One silver lining from the first quarter is that production revenues improved by 40 basis points. However, costs continued to escalate with the further drop in volume and reached more than $13,000 per loan despite substantial personnel reductions.”
Walsh added that factoring in both the production and servicing business lines, 32% of companies were profitable in the first quarter, up from 25% in the previous quarter.
The average production volume was $398 million per company in the first quarter, down from $436 million per company in the fourth quarter. On a per-loan basis, production revenues increased to $11,199 per loan in the first quarter, up from $9,637 per loan in the fourth quarter.
The purchase share of total originations, by dollar volume, remained unchanged at a peak level of 88% in the first quarter. The average loan balance for first mortgages increased to $329,159 in the first quarter, up from $322,225 in the fourth quarter.
Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a high of $13,171 per loan in the first quarter, up from $12,450 per loan in the fourth quarter of 2022. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,172 per loan.
The average number of production employees per company declined from 413 production employees in the fourth quarter of 2022 to 374 production employees in the first quarter of 2023.
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