Mortgage bankers see average profits on loans drop in 2017

Mortgage banks made an average profit of $711 on each loan they originated in 2017, down from $1,346 per loan in 2016, according to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report.

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“Production profits dropped by almost half in 2017 as rate-term re-financings diminished and the overall average production volume dropped,” Marina Walsh, MBA’s vice president of industry analysis, said. “Production revenues per loan were up slightly for the year, as higher loan balances mitigated the effects of competitive pressures. However, production expenses grew in all categories- sales, fulfillment, production support and corporate allocations – reaching a study-high $8,082 per loan for the Annual Performance Report.”

Further, higher loan balances drove up per-loan servicing fees and helped overall profitability for mortgage bankers holding mortgage servicing rights (MSR), Walsh said. About 80 percent of the firms in the study posted overall pre-tax net financial profits in 2017, down from 94 percent the previous year, she added.

The report also found that average production volume was $2.13 billion (8,882 loans) per company in 2017, compared to $2.68 billion (11,106 loans) per company in 2016. Also, the average production profit was 31 basis points in 2017, compared to 58 basis points in 2016. In addition, MBA estimated the refinancing share decreased to 35 percent in 2017, from 49 percent in 2016.

The study also revealed that the average loan balance for first mortgages reached $245,500 in 2017, an all-time high. This is up from $244,945 in 2016.