WASHINGTON, D.C. – April 2, 2013 – (RealEstateRama) — Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $2,256 on each loan they originated in the fourth quarter of 2012, down from $2,465 per loan in the third quarter, as increasing costs outweighed higher revenues, the Mortgage Bankers Association (MBA) reported today.
“Per-loan profits decreased in the fourth quarter, primarily driven by rising costs,” said MBA Associate Vice President of Industry Analysis Marina Walsh. “Historically, production costs have dropped with rising volume. In this quarter, however, despite high origination volumes, per-loan costs reached the highest levels we have seen in this study, other than during the first half of 2011, when origination volume was 60 percent lower.”
Among the other key findings of MBA’s Quarterly Mortgage Bankers Performance Report are:
• The average production profit (net production income) was 107 basis points in the fourth quarter, compared to 120 basis points in the third quarter.
• Average production volume was $488 million per company in the fourth quarter, up from $450 million per company in the third quarter. The average volume by count per company rose to 2,132 loans in the fourth quarter, up from 2,010 in the third quarter.
• The refinancing share of total originations, by dollar volume, was 61 percent in the fourth quarter, up from 57 percent in the third quarter. For the mortgage industry as whole, MBA estimates the refinancing share at 75 percent in the fourth quarter of 2012, up from 73 percent in the third quarter.
• Secondary marketing income improved to 279 basis points in the fourth quarter, compared to 271 basis points in the third quarter.
• Total loan production expenses – commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations – increased to $5,603 per loan in the fourth quarter, from $5,163 in the third quarter.
• Personnel expenses averaged $3,570 per loan in the fourth quarter, up from $3,320 per loan in the third quarter, with the largest increase being for fulfillment personnel expense, which rose to $858 per loan in the fourth quarter, from $739 per loan in the third quarter.
• The “net cost to originate” was $3,813 in the fourth quarter, from $3,353 per loan in the third quarter. 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.
• Productivity was 3.8 loans originated per production employee per month in the fourth quarter, down from 3.9 in the third quarter. Fulfillment productivity was 10.2 loans originated per fulfillment employee per month in the fourth quarter, down from 10.9 in the third quarter.
• 94 percent of the firms in the study posted pre-tax net financial profits in the fourth quarter of 2012, compared to 97 percent in the third quarter.
MBA’s Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions.
72 percent of the 311 companies that reported production data for the fourth quarter report were independent mortgage companies.
There are five performance report publications per year: four quarterly reports and one annual report.
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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org.