Mortgage Bankers’ Per-Loan Profit Jumps 51%

Independent mortgage bankers and subsidiaries made an average profit of $917 on each loan they originated in the second quarter of 2010, up from $606 per loan in the first quarter of 2010, the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) reported Tuesday.
[IMAGE] The increase was driven by a rise in the average production volume for each firm to $196.6 million in the second quarter of 2010, compared to $157.8 million in the first quarter of 2010, as more loans for home purchases were written thanks to the federal government's tax credit incentive.

""The significant rise in loan origination volume during the second quarter reflects the surge in first-time homebuyers seeking to take advantage of the tax credit before the deadline expired,"" said Marina Walsh, MBA's associate VP of industry analysis.

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Because of the increased origination volume, independent mortgage bankers' production operating expenses decreased to $4,677 per loan in the second quarter, from $5,147 per loan in the first quarter.

Walsh explained, ""Higher production operating expenses typically are associated with purchase production compared to refinances. But in this case, fixed costs were spread out over more loans and lenders experienced higher pull-through rates. These factors help explain why operating expense dropped on a per-loan basis by $470 per loan between quarters.""

Originators' profits are still significantly lower a year earlier. Walsh says this time last year, quarterly production volume averaged $280.9 million and the refinancing share was over 60 percent.

She says the heavy volume and refinancing share helped lower per-loan operating costs to $3,414 per loan and profits soared to $1,358 per loan in the second quarter of 2009.

Eighty-five percent of the firms in MBA's study posted pre-tax net financial profits in the second quarter of 2010, compared to 75 percent in the first quarter of 2010 and 96 percent in the second quarter of 2009.

Over 70 percent of the 312 companies that reported production data for the trade group's latest report were independent mortgage companies.