WASHINGTON–The margins on mortgage loans took a big dip during the fourth quarter of 2016.
New data released by the Mortgage Bankers Association shows that during Q4 the average profit on a mortgage loan slid to $575, down considerably from an average $1,773 in Q3 2016.
"Rapid increases in interest rates in the last two months of 2016 slowed mortgage activity in the fourth quarter, driving a significant decrease in loan production profits,” said Marina Walsh, MBA vice president of industry analysis, in a statement. "Mortgage lenders reported a combination of both lower revenues and higher expenses. On the revenue side, secondary marketing income dropped as mortgage lenders wrestled with less favorable pricing and pipeline challenges. At the same time, production expenses per loan rose as fixed costs were spread over fewer loans."
According to the MBA's Quarterly Mortgage Bankers Performance Report, the average pre-tax production profit was 24 basis points in Q4 compared to 74 bps in the Q3. Since the inception of the Performance Report in Q4 2008, net production income has averaged 53 bps, the MBA said.
Other data released in the report:
- Average production volume was $690 million per company in Q4 2016, down from $764 million per company in Q3. The average volume by count per company was 2,811 loans, down from 3,072 loans in the previous period.
- Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 347 basis points from 365 bps in the third quarter of 2016. On a per-loan basis production revenue was $8,137 compared to $8,742 the previous quarter. Net secondary marketing income fell from 291 bps or $7,037 per loan, to 272 bps or $6,433.