Real-Estate

Nonbank profit margins improve, but expenses are up – HousingWire

Nonbank mortgage lenders regained their footing in the third quarter, upping their net profit by 28% to $2,594 on each loan originated, according to a quarterly report published by the Mortgage Bankers Association on Tuesday. But they would be wise to look at expenses, which climbed to the second-highest rate in recorded history.

The results follow a turbulent second quarter, in which lenders fretted as net income and gain-on-sale margins cratered. The trade association found that from April to June 30, the reported net gain for nonbank lenders was $2,023, down from a reported gain of $3,361 per loan in the first quarter of 2021.

The reason for the rebound in the third quarter had to do with production revenue, which increased by more than 20 basis points from the previous quarter, said Marina Walsh, vice president of industry analysis at the MBA.

Total production revenue in the third quarter came in at 396 basis points, up from 375 bps in the second quarter. However, despite the increase, Walsh noted that compared to a year ago, production revenue lagged in the third quarter by almost 80 bps.

On a per-loan basis, production revenue climbed to $11,734 per loan in the third quarter, up from $10,691 per loan in the previous quarter, the report said.

Overall, 92% of nonbank lenders that partook in MBA’s survey posted overall profitability in the third quarter, up from 84% in the second. In total, 365 companies participated in the survey.

Meanwhile, average production volume fell in the third quarter to $1.17 billion per nonbank lender, a dip from $1.35 billion in the second quarter. That corresponded with a drop in the number of loans originated, from 4,615 on average in the second quarter, to 3,889 in the third quarter, according to the survey’s findings.

The trade group also noted that total loan production expenses and personnel expenses jumped in the third quarter, averaging to $9,140 and $6,185 per loan, respectively.

“Per-loan production expenses continued to rise for the fifth consecutive quarter, reaching the second-highest level ever reported. Rising sales costs that are often determined based on a percentage of loan balances was one primary factor for the increase in expenses,” Walsh said. “The average loan balance for first mortgages reached another study-high in the third quarter, passing the $300,000 threshold for the first time to over $308,000.”

Productivity for loans originated also dipped, with production employees averaging 3.6 loans per month in the third quarter compared to 3.7 loans in the second quarter.

Another trend highlighted in the report is that the purchase share of total originations has continued to steadily grow, coming in at 59% in the third quarter from 57% in the second, the trade group said.

The MBA estimates that for the mortgage industry as a whole, the purchase share was 46% in the third quarter, up from 44% in the previous quarter.

Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button