MBA: Q3 Per-loan Profits Double on Increased Volume, Secondary Gains

Average per-loan profits among independent mortgage banks andrnsubsidiaries more than doubled in the third quarter according to the MortgagernBankers Association’s (MBA) Mortgage Bankers Performance Report released onrnThursday.  These institutions made anrnaverage profit of $1,263 on each loan they originated during the quarterrncompared to $575 per loan in the second quarter.   86rnpercent of the firms in MBA’s study posted pre-tax net financial profits in thernthird quarter of 2011, compared to 70 percent in the second quarter of 2011.</p

The volume of loans per company also jumped to an average of $237 millionrnor 1,114 loans per company from $174 million or 866 loans per company in thernsecond quarter.   In addition, secondary marketing income rose from $4,006 to $4,563 perrnloan.  Gains improved asrnprimary-secondary spreads widened during the quarter.  </p

Total production operatingrnexpenses which includes commissions, compensation, occupancy and equipment, andrnother production expenses and corporate allocations dropped to $5,315 per loan comparedrnto $5,644 in the previous period while personnel expenses decreased from $3,561rnper loan to $3,317. </p

The “net cost tornoriginate” fell to $3,360 in the third quarter from $3,513 in thernsecond.  This category includes allrnproduction operation expenses and commissions minus all fee income but excludesrnsecondary marketing gains, capitalized servicing, servicing released premiumsrnand warehouse interest spread.  </p

“Higher volume helpedrnprofitability as production costs were spread over a greater number ofrnloans,” said Marina Walsh, MBA’s Associate VicernPresident of Industry Analysis.  “Third quarter productionrnexpenses dropped on a per-loan basis as volume rose, although expenses remainedrnhigh by historical standards when compared to other quarters with similarrnvolume.”</p

The average production profitrnin basis points was 66.37bp compared to 32.86bp in the second quarter.  The MBA said this was the most favorablernquarterly result in production since the refinancing wave in the third quarterrnof 2010 when net profits were 71.46bp.</p

Refinancing rose to 45 percent ofrntotal originations measured by dollar volume from 36 percent in the previousrnquarter.</p

MBA surveyed 311 institutions aboutrntheir production data.  Over 72 percent ofrnthose responding were independent mortgage companies.

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