MBA: Q3 Per-loan Profits Double on Increased Volume, Secondary Gains


Average per-loan profits among independent mortgage banks and
subsidiaries more than doubled in the third quarter according to the Mortgage
Bankers Association’s (MBA) Mortgage Bankers Performance Report released on
Thursday.  These institutions made an
average profit of $1,263 on each loan they originated during the quarter
compared to $575 per loan in the second quarter.   86
percent of the firms in MBA’s study posted pre-tax net financial profits in the
third quarter of 2011, compared to 70 percent in the second quarter of 2011.

The volume of loans per company also jumped to an average of $237 million
or 1,114 loans per company from $174 million or 866 loans per company in the
second quarter.   In addition, secondary marketing income rose from $4,006 to $4,563 per
loan.  Gains improved as
primary-secondary spreads widened during the quarter. 

Total production operating
expenses which includes commissions, compensation, occupancy and equipment, and
other production expenses and corporate allocations dropped to $5,315 per loan compared
to $5,644 in the previous period while personnel expenses decreased from $3,561
per loan to $3,317.

The “net cost to
originate” fell to $3,360 in the third quarter from $3,513 in the
second.  This category includes all
production operation expenses and commissions minus all fee income but excludes
secondary marketing gains, capitalized servicing, servicing released premiums
and warehouse interest spread. 

“Higher volume helped
profitability as production costs were spread over a greater number of
loans,” said Marina Walsh, MBA’s Associate Vice
President of Industry Analysis.  “Third quarter production
expenses dropped on a per-loan basis as volume rose, although expenses remained
high by historical standards when compared to other quarters with similar

The average production profit
in basis points was 66.37bp compared to 32.86bp in the second quarter.  The MBA said this was the most favorable
quarterly result in production since the refinancing wave in the third quarter
of 2010 when net profits were 71.46bp.

Refinancing rose to 45 percent of
total originations measured by dollar volume from 36 percent in the previous

MBA surveyed 311 institutions about
their production data.  Over 72 percent of
those responding were independent mortgage companies.

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