WASHINGTON, DC – December 14, 2010 – (RealEstateRama) — Independent mortgage banks and subsidiaries made an average profit of $1,423 on each loan they originated in the third quarter of 2010, up from $917 per loan in the second quarter of 2010, according to the Mortgage Bankers Association (MBA)â€™s 3rd Quarter 2010 Mortgage Bankers Performance Report released today.
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.
â€œTreasury 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 plungeâ€ said Marina Walsh, MBA’s Associate Vice President of Industry Analysis.
Walsh added, â€œHistorically, higher origination volume translates into a lower cost to originate per loan. 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 $4,438 in second quarter.â€
Among the additional key findings of MBAâ€™s Quarterly Mortgage Bankers Performance Report are:
â€¢ The refinance share of total originations ($) for this sample of independent mortgage bankers and subsidiaries rose to 57 percent in the third quarter 2010, compared to 35 percent in the second quarter 2010 and 44 percent in the third quarter 2009.
â€¢ The average pull-through (the number of closings divided by the number of loan applications) was down to 68 percent from 72 percent in the second quarter of 2010, as lenders struggled to close the higher volume of refinance applications received.
â€¢ 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.
â€¢ 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.
â€¢ 88 percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2010, compared to 85 percent in the second quarter of 2010 and 82 percent in the third quarter of 2009.
MBA’s Mortgage Bankers Performance Report 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.
Over 70 percent of the 307 companies that reported production data for this report were independent mortgage companies.
There are five performance report publications per year: four quarterly reports and one annual report.
For media inquiries please contact Melissa Key at (202) 557-2799 or .
To purchase or subscribe to the publications, call (202) 557-2830. The reports can also be purchased on MBA’s website by clicking here.
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.