Last year was a record-setting year in residential real estate, but despite that, lenders generated higher average profits in 2020. According to The Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report, average profits per originated loan in 2021 was $2,339, which was down from $4,202 the year prior.
Key findings:
- Average production volume was $4.9 billion (16,590 loans) per company in 2021, up from $4.5 billion (16,198 loans) per company in 2020. On a repeater company basis, average production volume was $5.1 billion (17,238) in 2021, up from $4.9 billion (17,592 loans) in 2020.
- In basis points, the average production profit (net production income) was 82 basis points in 2021, compared to 157 basis points in 2020. In the first half of 2021, net production income averaged 100 basis points, then decreased to 62 basis points in the second half. Since the inception of MBA’s Annual Performance Report in 2008, net production income by year has averaged 60 basis points ($1,456 per loan).
- For repeater companies submitting data in both the first and second half of the year, the average production profit was 100 basis points in the first half, compared to 62 basis points in the second half.
- The refinancing share of total originations (by dollar volume) decreased to 46%in 2021 from 55%in 2020. For the entire mortgage industry, MBA estimates the refinancing share last year decreased to 57% from 63% in 2020.
- The average loan balance for first mortgages reached a study-high of $298,324 in 2021, up from $278,725 in 2020. This is the largest single-year increase in the history of this report.
- Total production revenues (fee income, net secondary marking income and warehouse spread) were 382 basis points in 2021, down from 434 basis points in 2020. On a per-loan basis, production revenues were $11,003 per loan in 2021, down from $11,780 per loan in 2020.
- Total loan production expenses—commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations—increased to $8,664 per loan in 2021, up from $7,578 in 2020.
- Personnel expenses averaged $5,971 per loan in 2021, up from $5,272 per loan in 2020.
- Productivity was 2.5 loans originated per production employee per month in 2021, down from 3.3 in 2020. Production employees include sales, fulfillment, and production support functions.
- Net servicing financial income, which includes net servicing operational income, as well as mortgage servicing right (MSR) amortization and gains and losses on MSR valuations, was at a gain of $261 per loan in 2021, up from a loss of $176 per loan in 2020.
- Including all business lines, 96% of the firms in the study posted pre-tax net financial profits in 2021, down from 99% in 2020. In the first half of 2021, 96% of reporting repeater firms posted pre-tax financial profits, compared to 91% in the second half of 2021.
The takeaway:
“2021 was another stellar year for independent mortgage bankers, with production profits well above average but down 75 basis points from the record-setting 2020,” said Marina Walsh, CMB, MBA’s vice president of Industry Analysis. “Performance in the second half of 2021 declined relative to the first half of the year, which is an indication of where market conditions are heading in 2022 in an environment of high expenses, rising mortgage rates, and lower refinance originations.”
“After a truly phenomenal ride for mortgage companies, more difficult times are expected in 2022 and possibly beyond. The widespread upward pressure on rates will diminish rate-term refinance volume, and housing inventory shortages pose challenges for purchase originations,” added Wash. “Staying profitable will require prudent cost management, as well as more reliance on servicing operations to serve as a hedge against production declines.”
