Independent mortgage bankers were highly profitable in 2021, but made over $1,860 per loan less compared with the record earnings the prior year, according to the Mortgage Bankers Association.

IMBs and bank mortgage subsidiaries made an average of $2,339 per loan, making 2021 the second best year since MBA started tracking this data in 2008. But that annual average is down from $4,202 in 2020. The IMBs’ average per-loan profit in 2019, by comparison, totaled an average of just $1,470.

IMBs didn’t have consistent profitability throughout 2021, the MBA analysis found.

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“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,” Marina Walsh, the MBA’s vice president of industry analysis, in a press release.

Average net production income was 82 basis points last year, but in the first six months IMBs earned 100 bps. For the second half of 2021, they earned 62 bps.

For 2020, net production income was 157 bps.

The MBA previously reported that fourth quarter 2021 profits of $1,099 per loan were the lowest for a three-month period since the first quarter of 2019.

This lower profitability came as survey participants averaged higher loan volume, $4.9 billion last year versus $4.5 billion in 2020. And average loan balances for first mortgages — driven by record home sales prices — reached a survey-record high of $298,324 in 2021, up from $278,725 in 2020. The nearly $20,000 year-over-year gain is also the largest single-year increase since MBA started tracking IMB profits.

Record expenses ate into 2021’s per loan originated results to the greatest degree since the MBA started compiling this data. Lenders reported increased personnel expenses for sales, fulfillment and production support functions.

Total loan production expenses — including commissions, compensation, occupancy, equipment, plus other production expenses and corporate allocations — increased to $8,664 per loan in 2021, up from $7,578 in 2020. Personnel expenses alone averaged $5,971 per loan in 2021, up from $5,272 per loan the prior year.

Companies began attempting to manage those personnel costs via layoffs at the end of last year. Interfirst Mortgage announced 77 terminations in November. Then Better infamously terminated 900 employees, which was followed by a second round of layoffs this year and most recently a voluntary separation program at the New York-based company.

February’s Bureau of Labor Statistics data indicate the mortgage banker and broker businesses totaled 426,200 positions, down from 428,000 in January.

Higher fair valuation of mortgage servicing rights helped the segment shift to a profit from a loss in 2020. Net servicing financial income, which includes operational income, as well as MSR amortization and gains and losses on that asset’s valuation, was at an average profit of $261 per loan in 2021, up from a loss of $176 per loan in 2020.

Including all business lines, 96% of the firms reporting this data to the MBA posted pretax net financial profits last year, which while still a high share, was down from 99% in 2020.

IMBs could be facing a difficult environment for profitability not just in 2022 but for several years forward, Walsh said.

“Staying profitable will require prudent cost management, as well as more reliance on servicing operations to serve as a hedge against production declines,” declared Walsh.

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