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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 56 J O U R N A L June 2023 INDEPENDENT MORTGAGE BANK ORIGINATION PROFITS TAKE Q1 HIT T he Mortgage Bankers Association (MBA) has reported that indepen- dent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $1,972 on each loan they originated in Q1 of 2023, an improvement from the reported loss of $2,812 per loan in Q4 of 2022. "A net production loss of 68 basis points in the first quarter of the year is an improvement over the record 99-basis-point loss reported in the fourth quarter of 2022," said Marina B. Walsh, CMB, MBA's VP of Industry Analysis. "Conditions continue to be challenging for the industry, with now four consecutive quarters of production losses and nine consecutive quarters of volume declines." In terms of profitability, Walsh noted that including both the production and servic- ing business lines, 32% of companies were profitable in Q1 of 2023, up from 25% in Q4 of 2022. The average production volume was $398 million per company in Q1, down from $436 million per company in Q4. The volume by count per company averaged 1,264 loans in Q1, down from 1,395 loans in Q4. "One silver lining from the first quarter is that production revenues improved by 40 basis points," Walsh added. "However, costs continued to escalate with the further drop in volume and reached more than $13,000 per loan despite substantial personnel reductions." Additional findings of the MBA's Q1 2023 Quarterly Mortgage Bankers Performance Report include: » Total production revenue (fee income, net secondary marketing income, and ware- house spread) increased to 358 basis points in Q1, up from 317 bps in Q4. On a per-loan basis, production revenues increased to $11,199 per loan in Q1, up from $9,637 per loan in Q4. » The purchase share of total originations, by dollar volume, remained unchanged at a study high of 88% in Q1. For the mortgage industry as a whole, the MBA estimates the purchase share was at 80% in Q1 of 2023. » The average loan balance for first mort- gages increased to $329,159 in Q1, up from $322,225 in Q4. » Total loan production expenses—commis- sions, compensation, occupancy, equip- ment, and other production expenses and corporate allocations—increased to a study-high of $13,171 per loan in Q1, up from $12,450 per loan in Q4 of 2022. From Q3 of 2008 to Q1 2023, loan production expenses have averaged $7,172 per loan. » The average number of production em- ployees per company declined from 413 production employees in Q4 of 2022 to 374 production employees in Q1 of 2023 (on a repeater company basis). » Servicing net financial income for Q1 (without annualizing) was $54 per loan, up from $37 per loan quarter over quarter. Servicing operating income, which ex- cludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $102 per loan in the first quarter, down slightly from $104 per loan in the Q4. » Including all business lines (both produc- tion and servicing), 32% of the firms in the study posted pre-tax net financial profits in Q1, up from 25% in Q4. AFFORDABLE SUBURBS NEAR RED-HOT HOUS- ING MARKETS HEIGHTEN HOME- OWNERSHIP OP- PORTUNITIES W hile living in the city has many perks, the opportunity to be- come a homeowner is not one of them for many renters and homebuyers nationwide, according to a new market study from Point2. The prices of homes for sale in cities like San Francisco, Los Angeles, and New York are famously unaffordable. In fact, owning a home in these powerhouse cities is becoming an impossible dream for many, if not most, Americans. As interest rates continue their climb, dwindling inventory is making all aspiring homebuyers feel like unwilling participants in a game of musical chairs, forcing many home seekers to simply give up on their dreams of homeownership. Key findings include: » The top 20 largest, highest-priced U.S. cities are prohibitive for most aspiring homebuyers: The median home price in Irvine, California; San Francisco; and San Jose is well above $1 million, while medians in Los Angeles; New York, New York; Boston; and Washington, D.C., are far above $500,000. » However, 603 of the 777 suburbs within a 30-mile driving distance of these red-hot markets have prices per square foot of living space below the main city's median. » In fact, in 11 suburbs, the price per square foot is 60% to 65% lower than in the city, while 67 suburbs have median prices 50% to 59% lower than in the city. » The East Coast absolutely dominates when it comes to affordable suburbs: 95 of the top 100 most affordable suburbs are in New York; Washington, D.C.; Boston; and Miami. » The suburbs that are more expensive than the main city are really expensive: In 18 suburbs, the price per square foot of living space is 109% to a dizzying 385% higher than in the city. Given how expensive some of these urban hubs are, any renter and potential homebuyer wouldn't be foolish for thinking they need to move to another state to find something more affordable. However, new data shows that may not be the case. With more spacious homes and sprawling backyards, the suburb quickly became the answer to the growing needs for space during the pandemic. Could it also be the answer to today's homebuyers' prayers for affordable housing? According to Point2's latest analysis, the answer is yes: The price per square foot of living space is lower in 603 of the 777 suburbs orbiting America's 20 most expensive cities, with some suburbs boasting prices per square foot up to 65% lower compared to the main city. Data shows homebuyers willing