The average profit per loan originated by mortgage bankers and subsidiaries was $606 during the first quarter of 2010, down from $890 per loan in the fourth quarter of 2009 and $1,088 in the first quarter of 2009 according to the Mortgage Bankers Association.

The decline was driven by a drop in the average production volume for each firm to $157.8 million in the first quarter of 2010, compared to $216.5 million in the fourth quarter of 2009.  Additionally, production operating expenses rose to $5,147 per loan in the first quarter of 2010 compared to $4,402 per loan in the fourth quarter of 2009.

“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,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis. “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.”

Among the additional key findings of MBA’s Quarterly Mortgage Bankers Performance Report are:

• Total personnel expense rose to $3,296 per loan in the first quarter 2010, compared to $2,756 per loan in the fourth quarter 2009.
• 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.
• The “net cost to originate” 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.
• Retail sales productivity dropped to five loans per month per sales employee in the first quarter 2010, compared to seven loans per month per sales employee in the fourth quarter 2009.
• The average pull-through (the number of closings divided by the number of loan applications) was 68 percent in the first quarter of 2010, compared to 73 percent in the fourth quarter 2009.
• Net secondary marketing gains (excluding origination fees) averaged $3,464 per loan in the first quarter 2010, compared to $3,110 in the fourth quarter 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.