It was finally good news for the mortgage business in the second quarter of 2024, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.
- Independent mortgage banks and mortgage subsidiaries of chartered banks returned to profitability in the second quarter with a reported pre-tax net profit of $693 per loan in the second quarter, a significant rebound from the $645 per-loan loss posted in the first quarter and it was the first profitable quarter since the start of 2022.
The More The Merrier: The report also found that 78% of firms posted pre-tax net financial profits in the second quarter, up from 59% in the previous quarter. The average pre-tax production profit was 17 basis points (bps), a notable improvement from the 25 bps loss in the first quarter of 2024 and the 18 bps loss reported one year ago.
- Historically, the average pre-tax production profit since 2008 has been 42 bps, indicating that while profitability has returned, it remains below long-term averages.
Production volume also surged, with the average firm generating $492 million in loans, up from $384 million in the first quarter of 2024. Meanwhile, the average loan balance for first mortgages rose to $356,993, up from $345,761 in the previous quarter, reflecting rising housing costs.
- A key factor contributing to the profitability was the decrease in production expenses. Total loan production costs—including commissions, compensation, occupancy, equipment, and corporate allocations—dropped to 330 bps in the second quarter from 395 bps in the first. On a per-loan basis, costs fell to $10,806, a substantial decrease from $12,593 in the prior quarter.
- However, this figure is still well above the historical average of $7,524 per loan from the second quarter of 2008 to the present.
What They’re Saying: MBA’s Vice President of Industry Analysis, Marina Walsh, CMB, emphasized that this is a positive development after eight consecutive quarters of losses. “With a pickup in quarterly volume, productivity, and closings-to-applications pull-through, production costs dropped by about $1,800 per loan. These developments contributed to better net results, even as production revenues decreased from the previous quarter.”
The report signals a cautious recovery for mortgage bankers, driven by efficiency improvements and a resurgence in loan production, though challenges remain as production revenues continue to soften.
