A quarterly report released by the Mortgage Bankers Association earlier this month shows that, nationwide, commercial real estate and multifamily loan originations were down 49 percent by volume year-over-year across the country during the late summer and fall.
“Net production income has been in the red for six consecutive quarters. MBA forecasts lower industry volume over the next two quarters compared to last quarter, which means a turnaround is unlikely until the second quarter of 2024. One silver lining is that mortgage servicing continues to be a bright spot for many companies. Combining both the production and servicing business lines, roughly half of mortgage companies stayed profitable in the third quarter of 2023. Were it not for mortgage servicing, only about one in three companies would have been profitable,” MBA Vice President of Industry Analysis Marina Walsh said in a statement concerning that group’s survey.
On a per-loan basis, production revenues decreased to $10,426 per loan in the third quarter, down from $10,510 per loan in the second quarter, the MBA reported, while loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $11,441 per loan in the third quarter, up from $11,044 per loan in the second quarter of 2023. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,305 per loan. The average loan balance for first mortgages decreased to $341,708 in the third quarter, down from $343,386 in the second quarter.
A quarterly Federal Reserve survey of loan officers at 57 U.S. banks across the country, released the same week as the MBA survey, showed that two-thirds had tightened their construction loan credit standards either “somewhat” or “considerably” in the third quarter. A similar share reported doing the same for all types of loans secured by multifamily properties, with smaller banks reporting significantly more tightening in both cases.