Independent
mortgage bankers and subsidiaries had a dramatically better year in 2009 than the
one they had endured in 2008.
According to the Mortgage Bankers Association
(MBA)'s Annual 2009 Mortgage Bankers Production Survey released on Wednesday,
profits on the average loan originated last year rose to $1,135 from a dismal
$305 in 2008. The increase was the
result of lower production costs driven by a higher volume of loans, especially
for refinancing.
Production
expenses declined to $3,685 per loan last year from 4,717 in 2008 while
production income dropped to $4,820 from $5023. The average profit was 61.3
basis points compared to 15.4 basis points in 2008.
Mortgage subsidiaries of banks and thrifts
did much better than independent mortgage originators, averaging 79.5 basis
points per loan compared to 54.9 basis points for their independent
competitors.
"Production profits increased in 2009 over
2008 as higher origination volumes, particularly in refinancing, reduced
per-loan production expenses," said Marina Walsh, MBA's Associate Vice
President of Industry Analysis. "It was also clear bank and thrift
subsidiaries had an advantage over independent mortgage companies because of
lower loan officer compensation per loan and higher net interest spread due to
lower warehouse funding costs and the ability to keep loans in warehouse
longer."
The
report also found that:
- The average
production volume for each firm was $933 million in 2009, compared to
$500
million in 2008.
- The average
pull-through rate (number of loan actually closed relative to the number of applications)
improved to 68.44 percent in 2009, from 56.59 percent in 2008.
- The drop in loan
production expenses, the "net cost to originate" dropped to $1,628 per loan in
2009 from $2,291 in 2008. This figure includes all origination operating
expenses and commissions minus all fee income, but excludes secondary marketing
gains, capitalized servicing, servicing release premiums and warehouse interest
spread.
- The combination of
net marketing income and origination fees averaged 208 basis points in 2009,
compared to 211 basis points in 2008.
- 96 percent of the
firms in the study posted pre-tax net financial profits in 2009, versus
just 59
percent in 2008, and pre-tax net financial income was $4.9 million in
2009,
compared to $0.7 million in 2008.
- For the third
straight year, net warehousing income (the net interest spread between the
mortgage rate on a loan and the interest paid on a warehouse line of credit)
dropped, to $116 per loan in 2009 from $148 per loan in 2008, and $175 per loan
in 2007. Likewise, the average days in warehouse dropped to 14 days in 2009,
from 15 days in 2008 and 20 days in 2007.