Profits for independent mortgage banks and mortgage subsidiaries of chartered banks fell by around 50% in the third quarter of 2013 compared to the previous quarter, according to information from the Mortgage Banks Association.
The independent mortgage bankers made an average profit of $743 on each loan originated during the third quarter, down from $1,528 per loan in the second quarter, the MBA reported in the Quarterly Mortgage Bankers Performance Report.
“Third-quarter profits were reduced by half because of several factors: per-loan production expenses that reached study-highs, declining production volume and reduced secondary marketing income,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis, in a statement. “Historically, mortgage bankers have struggled to control fixed costs and right-size in a declining market, and the increasing costs of compliance and quality control only exacerbate an already difficult situation.”
Average production profit dropped from 75 basis points in the second quarter to 38 basis points in the third, marking the fourth consecutive quarter that production profits have decreased.
The decline in production volume per company saw a less steep decline, from $439 million in the second quarter of 2013 to $391 million in the third quarter. Volume dropped 6% to to an average 1,788 per company.
However, the net cost to originate a loan climbed $366 to $4,573.
Written by Alyssa Gerace