New data from the Mortgage Bankers Association shows independent mortgage bankers and subsidiaries average profit per loan was $917 during the second quarter of 2010, up 51% from the first quarter.
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 a result, production operating expenses decreased to $4,677 per loan in the second quarter of 2010, from $5,147 per loan in the first quarter of 2010.
“The significant rise in loan origination volume during the second quarter reflects the surge in first time home buyers seeking to take advantage of the tax credit before the deadline expired,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis. “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.”
However, average profits in the second quarter of 2010 were significantly lower than the profits in the second quarter of 2009. Walsh explained, “A year before, quarterly production volume averaged $280.9 million and the refinancing share was over 60 percent. 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.”
Additionally, the “net cost to originate” dropped to $2,611 per loan in the second quarter, from $2,945 per loan in the first quarter of 2010.