Mortgage lenders just posted record profits, expect even more in the next quarter
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According to the Mortgage Bankers Association, independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $ 4,548 on every loan they took in the second quarter of 2020, up from $ 1,600 in the first quarter.
“Fueled by rising borrower demand and record mortgage rates, second quarter mortgage production profits hit their highest level since the release of the MBA report in 2008,” said Marina Walsh, vice president of MBA industry analysis. “The production volume averaged over $ 1 billion per company, and there was an ideal combination of higher revenues and lower costs. “
Revenue increased 57 basis points from the first quarter, while spending improved by $ 844 per loan. Productivity has also increased, reaching levels not seen since 2012.
These conditions, along with continued low mortgage rates, are likely the reason mortgage lenders’ profit margin outlook for the next three months has increased, according to Fannie’s third quarter 2020 mortgage lender sentiment survey. Mae. Mortgage rates set a new record last week, according to Freddie Mac.
Almost half of lenders (48%) said they believed profit margins would increase from the previous quarter, with 37% saying they would stay the same and just 15% saying profits would decrease.
“This quarter’s MLSS results align with the strong housing recovery amid the larger economic downturn from COVID-19,” said Doug Duncan, chief economist at Fannie Mae. “Purchase demand growth expectations for the next three months reached the highest values in the third quarter since the start of the survey. Suppressed consumer demand, persistently low mortgage rates and favorable mortgage rate spreads have helped boost lenders’ profitability. “
Lenders have reported strong consumer demand for all types of loans and for back-purchase and refinancing. Lenders have signaled a further tightening of credit standards in the past three months, amid uncertainty surrounding the economic recovery from the pandemic, but expect them to stay the same over the next three months .
“Although the housing market is showing remarkable strength amid the economic and health crisis, potential long-term downside risks remain, including a weak labor market, low inventories and uncertain housing prices. housing, ”Duncan said.