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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.Mortgage Banker Profits Drop as Production Slows and Origination Costs Balloon
Independent mortgage bankers and
subsidiaries saw a sharp drop in their profits in the first quarter of 2010
according to data released today by the Mortgage Bankers Association
(MBA).
The average profit made on each
loan was $606, a decrease of 32 percent from the $890 that was earned in the
fourth quarter of 2009 and a 44 percent decline from the $1,088 that was reported in the first
quarter of 2009. 75 percent of the firms in
the study posted pre-tax net financial profits in the first quarter 2010,
compared to 76 percent in the fourth quarter of 2009.
Survey
respondents reported a drop in the average production volume to
$157.8 million from $216.5 million in the previous quarter. MBA reported that the volume decrease was the
main driver behind the decline in profitability. As volume dropped, production operating
expenses rose to $5,147 per loan compared to $4,402 in the fourth quarter, an
increase of 17 percent.
The "net cost to
originate" rose to $2,945 per loan in the first quarter of 2010, from
$2,345 per loan in the fourth quarter of 2009. This figure includes all
production operating expenses and commissions minus all fee income, but
excludes secondary
marketing gains, capitalized servicing, servicing released premiums and
warehouse interest spread.
Personnel expenses
increased from $2,756 per loan to $3,296 in the first quarter. Marina Walsh, MBA's
Associate Vice President of Industry Analysis commented, "It is
extremely difficult for mortgage companies to effectively manage staffing
levels. Either companies are stretching to meet the incredible demand, or
they are carrying excess capacity which drives up per-loan personnel expense. Despite this challenge as originations declined in the
first quarter, the independents and bank subsidiaries still produced an average
of thirty two basis points of production profit, primarily resulting from
higher secondary marketing gains."
Those secondary marketing gains
(excluding origination fees) averaged a net $3,464 per loan in the first
quarter of 2010, compared to $3,110 in the fourth quarter of 2009.
MBA reported that both individual employee
retail sales and the average pull-through rate, the ratio of closings to
applications, declined during the quarter.
Productivity per sales employee was an average of five loans to month
compared to seven loans in the fourth quarter.
During the 4th Quarter, companies closed an average of 73 percent of the
loans for which they took applications, in the most recent quarter they closed
66 percent.
MBA's 1st Quarter 2010
Mortgage Bankers Production Survey covers 295 companies, 70 percent of
which
are independent mortgage companies.
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Mortgage Banker Profits Drop as Production Slows and Origination Costs Balloon
Independent mortgage bankers and
subsidiaries saw a sharp drop in their profits in the first quarter of 2010
according to data released today by the Mortgage Bankers Association
(MBA).
The average profit made on each
loan was $606, a decrease of 32 percent from the $890 that was earned in the
fourth quarter of 2009 and a 44 percent decline from the $1,088 that was reported in the first
quarter of 2009. 75 percent of the firms in
the study posted pre-tax net financial profits in the first quarter 2010,
compared to 76 percent in the fourth quarter of 2009.
Survey
respondents reported a drop in the average production volume to
$157.8 million from $216.5 million in the previous quarter. MBA reported that the volume decrease was the
main driver behind the decline in profitability. As volume dropped, production operating
expenses rose to $5,147 per loan compared to $4,402 in the fourth quarter, an
increase of 17 percent.
The "net cost to
originate" rose to $2,945 per loan in the first quarter of 2010, from
$2,345 per loan in the fourth quarter of 2009. This figure includes all
production operating expenses and commissions minus all fee income, but
excludes secondary
marketing gains, capitalized servicing, servicing released premiums and
warehouse interest spread.
Personnel expenses
increased from $2,756 per loan to $3,296 in the first quarter. Marina Walsh, MBA's
Associate Vice President of Industry Analysis commented, "It is
extremely difficult for mortgage companies to effectively manage staffing
levels. Either companies are stretching to meet the incredible demand, or
they are carrying excess capacity which drives up per-loan personnel expense. Despite this challenge as originations declined in the
first quarter, the independents and bank subsidiaries still produced an average
of thirty two basis points of production profit, primarily resulting from
higher secondary marketing gains."
Those secondary marketing gains
(excluding origination fees) averaged a net $3,464 per loan in the first
quarter of 2010, compared to $3,110 in the fourth quarter of 2009.
MBA reported that both individual employee
retail sales and the average pull-through rate, the ratio of closings to
applications, declined during the quarter.
Productivity per sales employee was an average of five loans to month
compared to seven loans in the fourth quarter.
During the 4th Quarter, companies closed an average of 73 percent of the
loans for which they took applications, in the most recent quarter they closed
66 percent.
MBA's 1st Quarter 2010
Mortgage Bankers Production Survey covers 295 companies, 70 percent of
which
are independent mortgage companies.
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