Refinance Boom Drove Per-Loan Profits In Q1

Posted by Orb Staff on September 17, 2009 No Comments
Categories : Residential Mortgage

Mortgage bankers made an average profit of over $1,088 on each loan they originated in the first quarter of 2009, the Mortgage Bankers Association (MBA) reports.

This profit represents a marked improvement over the fourth-quarter 2008 results in which average profits were $148 per loan, according to the MBA's Quarterly Mortgage Bankers Performance Report, which measures the performance of independent mortgage bankers and subsidiaries of banks, thrifts and hedge funds.

The MBA's associate vice president of industry analysis, Marina Walsh, says this year's refinance boom allowed for a drop in production operating expenses per loan.

 "The average share of refinancings to total originations for these companies jumped to 66 percent in the first quarter, from 42 percent in the previous quarter. As a result, the average production volume for each firm was $213.9 million in the first quarter of 2009, compared to $125.6 million in the fourth quarter of 2008," Walsh says.

The ‘net cost to originate" – which 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 – fell to $1,725 per loan in the first quarter of 2009, compared to $2,324 per loan in the fourth quarter of 2008.

The servicing shops of the independent mortgage companies and subsidiaries analyzed essentially broke even in the first quarter of 2009, with net financial losses of $1 per loan serviced, the MBA adds. Quarter-by-quarter net operating servicing income (i.e., servicing fees, net escrow earnings and ancillary income less direct and indirect expenses) remained at $165 per loan. The direct cost to service averaged $163 per loan.

SOURCE: Mortgage Bankers Association

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