IMBs remain profitable, but margins slip 44% in Q4 behind lower revenues

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported an average pretax net profit of $674 on each loan originated in the the fourth quarter of 2025 — a 44% decline compared to the $1,201 per-loan profit they posted in the third quarter.

The data released Wednesday by the Mortgage Bankers Association (MBA) indicated that lower revenues, rather than rising expenses, drove the decreased profitability.

“Net production profits averaged 17 basis points in the fourth quarter of 2025, an increase from losses of 4 basis points in the fourth quarter of 2024,” Marina Walsh, the MBA’s vice president of industry analysis, said in a statement.

“Combining both production and servicing operations, 68% of mortgage companies in MBA’s sample posted overall profits in the fourth quarter of 2025, a model increase of 61% one year. Despite these improvements, fourth-quarter production profits were down from the previous quarter.”

Walsh went on to note that, between the third and fourth quarters of 2025, the average IMB saw production volume rise, while revenues declined and the overall cost to originate stayed relatively flat. This was tied in part to increased loan locks in September that were reported in Q3 earnings rather than in Q4, which follows relevant accounting rules.

The MBA also explained that increased markdowns and amortization from payoffs across mortgage servicing rights (MSR) portfolios made a dent in profits across origination and servicing business lines from October through December.

Deeper dive

The trade group’s quarterly Mortgage Bankers Performance Report relied on data from 338 companies in the nonbank sector. Eighty-one percent of the companies that reported production data for the final quarter of 2025 were IMBs, while the other 19% were mortgage subsidiaries or other nondepository institutions.

The data showed that the average company had a pretax production profit of 17 basis points in Q4 2025, down from a profit of 33 bps in the prior quarter. For historical comparison, the average quarterly pretax production profit since the start of 2008 is 39 bps.

Across origination and servicing channels, 68% of the companies in the MBA’s report had a pretax net profit in Q4 2025, down from 85% in the prior quarter.

On average, companies produced $643 million in mortgage originations during the fourth quarter, up from $634 million in the third quarter. Average loan count also rose during the quarter, from 1,866 to 1,973 per company.

Total production revenue — which includes fee income, net secondary marketing income and warehouse spread — dropped to 340 bps in Q4, down 19 bps compared to Q3. On a per-loan basis, production revenue declined during the quarter, from $12,310 in Q3 to $11,776 in Q4.

Meanwhile, total production expenses — which includes commissions, compensation, occupancy, equipment and other production expenses and corporate allocations — decreased to 323 bps in Q4, down slightly from 326 bps in the third quarter. On a per-loan basis, expenses dropped slightly from $11,109 to $11,102. This figure remains significantly higher than its historic norm of $7,846 per loan since Q1 2008.

Purchase loans represented 71% of all first-lien mortgage originations by dollar volume for nonbanks from October through December. The MBA estimated that the purchase share across the entire mortgage industry was 58% during the same period.

The average loan balance for a first mortgage rose from $373,414 in Q3 to $379,587 in Q4. Across all originations, including junior-lien loans, such as home equity lines of credit (HELOCs), the average balance rose from $355,145 to $362,912 during the same period.

In the servicing channel, net financial income in Q4 (without annualization) was $13 per loan, down from $29 per loan in the prior quarter. And servicing operating income dropped from $92 to $90 per loan during the quarter. This figure excludes MSR amortization, gains and losses in the valuation of servicing rights net of hedging gains and losses, as well as gains and losses on bulk sales of MSRs.