Mortgage Banking Profits Up During Third Quarter says Report

Mortgage bankers made an average profit of $1,423 per loan originated during the third quarter of 2010, up from $917 per loan in the second quarter of 2010, according to the Mortgage Bankers Association (MBA)’s 3rd Quarter 2010 Performance Report released on Tuesday.

The increase was driven by higher secondary marketing gains that increased from $3,455 per loan in the second quarter 2010 to $4,069 per loan in the third quarter 2010.  The secondary marketing gains offset further increases in the cost to originate a loan.

“Treasury rates declined further during the third quarter 2010, driving down mortgage interest rates, which caused those who were on the fence about refinancing to finally take the plunge” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis.

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“Historically, higher origination volume translates into a lower cost to originate per loan,” Walsh added.  “This has been particularly true during refinancing waves. However, with stricter lending standards in place, higher volume did not result in lower origination costs in the third quarter 2010. Although the average origination volume per company rose to $237 million in the third quarter from $197 million in the second quarter, direct loan production expenses rose to $4,539 per loan in the third quarter from $4,438 in second quarter.”

The “net cost to originate” increased to $2,720 per loan in the third quarter of 2010, from $2,611 per loan in the second quarter of 2010.  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.

Total personnel expense rose slightly to $3,034 per loan in the third quarter of 2010, compared to $3,017 per loan in the second quarter of 2010.  In the third quarter 2009, personnel expenses averaged $2,770 per loan.

The percent of firms in the study that posted pre-tax net financial profits in the third quarter of 2010 increased to 88 percent, compared to 85 percent in the second quarter.

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  • I wonder if the Fed was aware of these numbers when they drafted the April 1 compensation ruling as it relates to small business owners(brokers). Makes it pretty difficult for a broker to survive, while bankers will continue to earn revenue on both ends of a transaction. Less competition equals higher costs for consumers. Looks like the big banks’ lobbyists were successful again.

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