Lenders took a loss per-loan in Q2 as some servicing income slipped

The Mortgage Bankers Association on Thursday reported that the industry's average per-loan earnings fell into the red and financial income from servicing decreased during the second quarter.

Independent mortgage banks and the housing finance subsidiaries of chartered depositories took an average loss of $82 on each loan they originated. That translates to 5 basis points of net production loss. In the previous quarter, they made a profit of 5 basis points in net production income or $223 per mortgage. A year ago, per-loan profits were dramatically higher at $2,023 or 73 basis points.

The average secondary market income from loan sales was lower on a net basis in 2Q compared to the first, falling to 243 basis points from 270, or $7,939 per loan from $8,429 per loan. A year ago, it was 375 basis points or $10,691 per loan. Net financial income from servicing averaged $133 per loan, down from $242 the previous quarter, but up significantly from $7 a year earlier.  

Servicing operating income was $97 per loan, up from $94 the previous quarter and compared to $71 a year ago. That excludes line items related to the ownership and hedging of mortgage servicing rights from operating income, making it a measure that may be more pertinent to subservicers that don't own MSRs.

The shifts in these numbers reflect the right-sizing taking place as changes in rates and burnout have reduced application activity following an extraordinary refinancing boom. These challenges and a volatile secondary market for mortgage assets outweighed the usual benefits of spring homebuying.

"Combining both production and servicing operations, only 57% of the companies in our report were profitable," said Marina Walsh, vice president of industry analysis, at the Mortgage Bankers Association, in a press release. "Pulling out a profit in these difficult conditions is no easy feat."