Mortgage loan profits tumbled by 14 percent in the second quarter of 2013 the Mortgage Bankers Association (MBA) said on Friday.  Independent mortgage banks and mortgage subsidiaries of chartered banks reporting to an MBA survey said they had an average profit of $1,528 on each loan they originated during the quarter compared to $1,772 on each loan in Quarter 1.  In basis points, the average production profit or net income was 75 basis points, down from 86 basis points in the previous quarter.

MBA's Quarterly Mortgage Bankers Performance Report said that, measured by dollar volume, the purchase share of originations increased from 40 percent in the first quarter to 52 percent in the second.  This was the first time purchase originations had taken the majority share of originations since the third quarter of 2011.  MBA estimates that the purchase share for the entire industry was 36 percent in the second quarter compared to 26 percent in the first.

 "While overall volume remained relatively flat, we are seeing a shift in product mix towards purchase originations," said MBA Associate Vice President of Industry Analysis Marina Walsh. "Per-loan production costs continue to rise and there are signs of pricing pressure as evidenced by the reduction in secondary marketing income."

Total loan production expenses--commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations--increased to $5,818 per loan in the second quarter, from $5,779 in the first quarter. Personnel expenses averaged $3,808 per loan compared to $3,785 previously.

Companies reporting to MBA regarding their second quarter operations had an average of 261 production employees, ten more than the average reported in the first quarter.  However, among those companies which reported in both quarters, the average had increased to 271.  Productivity was down slightly to 2.9 loans per production employee per month from 3.1 loans in the first quarter.

The net cost to originate, including all production operating expenses and commissions minus all fee income was $4,207, up from $4,182 per loan.  The net cost to originate excludes secondary marketing gains, capitalized servicing, servicing released premiums, and warehouse interest spread.  Secondary marketing income declined to 263 basis points in the second quarter, compared to 274 basis points in the first quarter

Lenders reported they had originated an average of 1,921 loans in the second quarter, slightly fewer than in the first quarter when the average was 1,953.  Average production income was $439 million per company, down from $442 million.  92 percent of the firms in the study posted pre-tax net financial profits in the second quarter, down from 94 percent of the firms in the first quarter.