CONTACT:
Adam DeSanctis
(202) 557-2727
IMB Production Profits Decrease in the First Quarter of 2022
WASHINGTON, D.C. (May 24, 2022) — Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $223 on each loan they originated in the first quarter of 2022, down from a reported gain of $1,099 per loan in the fourth quarter of 2021, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.

“It was a challenging mortgage market environment in the first quarter of 2022, with rising mortgage rates and low housing inventory resulting in lower production volume. The average pre-tax net production income was only 5 basis points, which is the lowest since the fourth quarter of 2018 and well below the quarterly average of 55 basis points dating back to 2008,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “While lower production revenue contributed to scant profit margins, the primary driver was cost, with total loan production expenses ballooning to a new study-high of $10,637 per loan – up more than $1,000 per loan from fourth-quarter 2021 and more than $2,500 per loan from one year ago.”

Added Walsh, “In addition to cost increases, productivity slipped for both sales and fulfillment staff. Furthermore, pull-through rates of closings to applications declined by 5 percentage points in the first quarter, affecting both revenue and cost. With the record-setting refinance volume of the past two years in the rearview mirror, the mortgage industry is clearly in a period of transition and many companies will need to make tough decisions.”

Including all business lines (both production and servicing), 72 percent of the firms in the study posted a pre-tax net financial profit in the first quarter of 2022. Those firms with servicing operations benefited from slower prepayments and low delinquencies that helped boost mortgage servicing right (MSR) valuations. Were it not for servicing operations, only 49 percent of the firms in the study would have posted a net financial profit in the first quarter of 2022.

Key findings of MBA’s First-Quarter 2022 Quarterly Mortgage Bankers Performance Report include:

  • The average pre-tax production profit was 5 basis points (bps) in the first quarter of 2022, down from an average net production profit of 38 bps in the fourth quarter of 2021, and down from 124 basis points on a year-over-year basis. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 55 basis points.
  • Average production volume was $808 billion per company in the first quarter, down from $1.13 billion per company in the fourth quarter of 2021. The volume by count per company averaged 2,587 loans in the first quarter, down from 3,711 loans in last year’s fourth quarter.
  • Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 350 bps in the first quarter, down from 353 bps in the fourth quarter. On a per-loan basis, production revenues increased to $10,861 per loan in the first quarter, up from $10,569 per loan in the fourth quarter.
  • Net secondary marketing income decreased to 270 bps in the first quarter, down from 275 bps in the fourth quarter. On a per-loan basis, net secondary marketing income increased to $8,429 per loan in the first quarter from $8,326 per loan in the fourth quarter.
  • The purchase share of total originations, by dollar volume, increased to 63 percent in the first quarter from 60 percent in the fourth quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 55 percent in the first quarter of 2022.
  • The average loan balance for first mortgages increased to a new study high of $324,368 in the first quarter, up from $312,306 in the fourth quarter.
  • The average pull-through rate (loan closings to applications) decreased to 73 percent in the first quarter, down from 78 percent in the fourth quarter.
  • Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a study-high of $10,637 per loan in the first quarter, up from $9,470 per loan in the fourth quarter of 2021. From the third quarter of 2008 to last quarter, loan production expenses have averaged $6,829 per loan.
  • Personnel expenses averaged $7,113 per loan in the first quarter, up from $6,438 per loan in the fourth quarter.
  • Productivity decreased to 1.8 loans originated per production employee per month in the first quarter from 2.4 loans per production employee per month in the fourth quarter. Production employees includes sales, fulfillment, and production support functions.
  • Servicing net financial income for the first quarter (without annualizing) was at $242 per loan, up from $71 per loan in the fourth quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, was $94 per loan in the first quarter, up from $87 per loan in the fourth quarter.
  • Including all business lines (both production and servicing), 72 percent of the firms in the study posted pre-tax net financial profits in the first quarter, down from 76 percent in the fourth quarter.

MBA's Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Eighty-four percent of the 366 companies that reported production data for the first quarter of 2022 were independent mortgage companies, and the remaining 16 percent were subsidiaries and other non-depository institutions.

There are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Media wishing to view a copy of either report should contact Adam DeSanctis at (202) 557-2727 or adesanctis@mba.org. To purchase or subscribe to the publications, call (202) 557-2879. The reports can also be purchased on MBA's website by visiting www.mba.org/PerformanceReport.

 
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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 390,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets, to expand homeownership, and to extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of more than 2,000 companies includes all elements of real estate finance: independent mortgage banks, mortgage companies, mortgage brokers, commercial banks, thrifts, REITs, Wall Street conduits, life insurance companies, credit unions, and others in the mortgage lending field. For additional information, visit MBA's website: www.mba.org.
 
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