September 19, 2021

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Mortgage News

Mortgage banking profits drop by nearly one-third in Q4

Profitability in the home finance business declined for the first time since the pandemic began in the fourth quarter of last year, according to a Mortgage Bankers Association report released Tuesday.

The average profit per loan for independent mortgage and home loan companies from chartered banks decreased by around a third year over year the third quarter at $ 3,738. This is equivalent to 137 basis points of principal for each unit that arose during the period.

The decline in profitability in the subsequent quarter was seen despite lenders seeing record lending volumes in the last three months of 2020. The period was the third best ever in the industry. The only two periods when earnings were higher were Q2 and Q3 2020.

“While manufacturing profits were incredibly high in the fourth quarter, secondary marketing profits declined, resulting in an overall decline in manufacturing revenues,” said Marina Walsh, vice president of industry analysis for the Mortgage Bankers Association, in a press release.

Margins tend to be thin as the refinancing booms advance a refinancing fee of 50 basis points added in December by Fannie Mae and Freddie Mac likely contributed to the decline.

Secondary market net income for the period was 346 basis points, or $ 9,655 per loan, compared to 394 basis points and $ 10,883 in the previous quarter.

Additionally, the cost of production increased from $ 7,452 to $ 7,938 per loan. The majority of that expense came from staff, which was $ 4,526. For the third quarter, the average staff spend was $ 5,124.

The service’s financial results improved for the quarter, increasing to $ 5 in profit per loan from a loss of $ 30 in the prior fiscal period.