Low mortgage rates generate unprecedented profit per loan gain


The average net profit gain on loans made by non-banks and some subsidiaries of chartered banks hit a survey record in the second quarter, an industry trade group found.

This gain of $ 4,548 per loan recorded by the Mortgage Bankers Association was more than double the $ 1,600 profit per loan generated by these companies. in the first trimester, and the $ 1,675 they brought in during the same quarter a year ago.

Expressed as a percentage of the loan balance, net production income was 167 basis points in the second quarter, compared to more than 61 basis points in the first quarter and 64 basis points a year ago.

The increase in profitability seen between Q1 and Q2 was the largest recorded since the MBA began tracking the metric in 2008.

Federal policy decisions related to the coronavirus that, among other things, pushed rates to historic lows were largely responsible for the fortunes of the housing finance industry in the second quarter. The low rates resulted in high production volumes during the period, but had a downside for service providers.

Mortgage agents suffered a net financial loss of $ 68 per loan in the second quarter, compared to a loss per loan of $ 171 in the first quarter and a loss per loan of $ 74 in the second quarter of last year.

Even though the mortgage services segment suffered a net financial loss per loan, 96% of companies polled by the MBA reported pre-tax net financial profits in the quarter, compared to 78% in the first quarter and 85% in the second quarter. a year ago.

Services operating income was $ 23 per loan in the second quarter, compared to $ 52 per loan in the first quarter and $ 42 in the second quarter a year ago. The MBA excludes amortization of mortgage management rights and other changes related to the financial value of MSRs, MSR hedges and wholesale sales when calculating operating profit in this segment.

The ability of the mortgage industry to operate effectively through work-from-home arrangements improved relatively during the second quarter.

In the production divisions, an average of 3.5 loans were issued per employee compared to 2.7 in the first quarter and 2.3 in the second quarter of last year. Sales, fulfillment and support employees are included in this category.

Refinancing loans, which consume less work and are more sensitive to interest rates than mortgage loans, represented 61% of production in the second quarter. By comparison, refinances accounted for 48% of loans in the first quarter and 26% of mortgages in the second quarter of last year.

Several factors make the sustainability of the industry’s profitability difficult to predict, including the federal election this fall.

Government-sponsored companies that buy a large chunk of US market home loans are currently expected to start charging refinancing fees in December to help GSEs rebuild their capital and exit the tutelage. Some fear that the fees could affect consumer demand and profits if federal officials follow through on their implementation.

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