The Independent Mortgage Bank (IMB) finally sees the light at the end of the tunnel after two tough and unprofitable years in the mortgage industry.
In the second quarter of 2024, IMB and Charter Bank’s mortgage subsidiaries averaged a net pretax profit of $693 per loan, up from a loss of $645 per loan in the previous quarter, according to IMB data. Mortgage Bankers Association (Master of Business Administration).
“Production costs per loan decreased by approximately $1,800 as quarterly transaction volume, productivity and application closing times increased. Although production revenue declined from the prior quarter, these developments resulted in better net profit.
Nearly 80% of the mortgage companies in the sample reported overall profits, including production and service business lines. Of the 345 companies reporting production data, 82% are IMBs, while the remaining 18% are subsidiaries and other non-depository institutions.
Total production revenue (including fee income, net secondary marketing revenue and warehouse spreads) fell to 347 basis points (bps) in the second quarter, down from 371 bps in the first quarter. On a per-loan basis, production revenue per loan fell to $11,499 per loan in the second quarter from $11,947 per loan in the prior quarter.
Total loan production expenses (including commissions, compensation, occupancy, equipment and other corporate allocations) fell to 330 basis points from 395 basis points last month. Loan production expenses in the second quarter fell to $10,806 per loan from $12,593 in the previous quarter, but were higher than the $7,389 average per quarter between the second quarter of 2008 and the second quarter of 2024.
Servicing operating income, excluding mortgage servicing rights (MSR) amortization, servicing rights valuation gains/losses (net of hedging gains/losses and gains/losses on volume sales of MSRs), was $88 per loan, down from $93 In the first season.
The sale of MSRs does not directly impact earnings as a source of income, but converting MSRs into cash through sales transactions can enhance the lender’s cash flow and overall liquidity.
According to its latest forecast, MBA expects one- to four-family residential mortgage loan originations to increase to $429 billion in the second quarter of 2024, up from $411 billion in the first quarter of 2024.
The trade group also expects 30-year fixed mortgage rates to average about 6.5% in the second quarter of 2024 before falling to 5.9% the following quarter.
