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Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $40 on each loan they originated in Q4 2024, a decrease from the reported net profit of $701 per loan in Q3 2024.
That’s according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report, released today.
Of the 338 companies that reported production data for Q4 2024, 82% were independent mortgage companies and the remaining 18% were subsidiaries and other non-depository institutions.
Including all business lines (both production and servicing), 61% of the firms in the report posted pre-tax net financial profits in Q4 2024, down from 71% in Q3 2024
“Net production losses resumed in the fourth quarter of 2024 after two consecutive quarters of modest gains,” commented Marina Walsh, CMB, MBA’s vice president of industry analysis. “This decrease marks the ninth quarter of net production losses in the past three years, albeit a much smaller loss compared to the fourth quarters of 2022 and 2023.”
Walsh shared that Q4 2024 revenues and volume for IMBs were relatively flat compared to Q3 2024, while average production expenses increased. While per-loan expenses increased across lenders of all sizes, lenders with larger volume benefitted from scale due to fixed costs being spread over more volume.
The average production volume was $540 million per company in Q4 2024, down from $542 million per company in Q3 2024. The volume by count per company averaged 1,609 loans in Q4, down from 1,642 loans in Q3.
Total production revenue (fee income, net secondary marketing income, and warehouse spread) decreased to 339 bps in the fourth quarter, down from 341 bps in the third quarter. On a per-loan basis, production revenues decreased to $11,190 per loan in the fourth quarter, down from $11,417 per loan in the third quarter.
“With the slowing in prepayments in the fourth quarter, net servicing financial income improved and helped the bottom line. Across both production and servicing operations, 61% of mortgage companies in MBA’s sample were profitable, compared to 71% in the previous quarter,” added Walsh.
The average pre-tax production loss was 4 basis points (bps) in Q4 2024, a dip from the reported profit of 18 bps in Q3 2024, but less than the loss of 73 basis points one year ago. The MBA says the average quarterly pre-tax production profit from Q4 2008 to the most recent quarter is 41 basis points.
The report revealed that total loan production expenses, including but not limited to commissions, compensation and occupancy, increased to 344 basis points in Q4 2024 from 323 basis points in Q3 2024. Per-loan costs increased to $11,230 per loan in the fourth quarter, up from $10,716 per loan in the third quarter of 2024.
From Q4 2008 to Q4 2024, loan production expenses have averaged $7,628 per loan.
The purchase share of total originations, by dollar volume, was 78%. For the mortgage industry as a whole, MBA estimates the purchase share was at 62% during Q4 2024.
Servicing net financial income for the fourth quarter (without annualizing) was $142 per loan, up from a loss of $25 per loan in the third quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/losses on the bulk sale of MSRs, was $84 per loan in Q4, down from $93 per loan in Q3.
