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Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $534 on each loan they originated in the second quarter, according to data from the Mortgage Bankers Association (MBA). The second quarter results marked an improvement from the reported loss of $1,972 per loan in the first quarter.

“There were signs of improvement in the second quarter of 2023,” said Marina Walsh, MBA’s vice president of industry analysis. “Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, the majority of mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

Including both the production and servicing business lines, 58% of companies were profitable last quarter, up from 32% in the first quarter of and 25% in the fourth quarter of 2022.

The average pre-tax production loss was 18 basis points (bps) in the second quarter, compared to an average net production loss of 68 bps in the first quarter of 2023, and down from a loss of 5 basis points one year ago. The average production volume was $502 million per company in the second quarter, up from $398 million per company in the first quarter.

Total production revenue – including fee income, net secondary marketing income and warehouse spread – decreased to 328 bps in the second quarter, down from 358 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,510 per loan in the second quarter, down from $11,199 per loan in the first quarter.

The purchase share of total originations, by dollar volume, increased to a record high of 89% the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 80% in the second quarter.