Mortgage Lender Profits, Pull-Through, and Production Improve in 2009

by devteam July 2nd, 2010 | Share

Independentrnmortgage bankers and subsidiaries had a dramatically better year in 2009 than thernone they had endured in 2008.</p

According to the Mortgage Bankers Associationrn(MBA)'s Annual 2009 Mortgage Bankers Production Survey released on Wednesday,rnprofits on the average loan originated last year rose to $1,135 from a dismalrn$305 in 2008.  The increase was thernresult of lower production costs driven by a higher volume of loans, especiallyrnfor refinancing.</p

Productionrnexpenses declined to $3,685 per loan last year from 4,717 in 2008 whilernproduction income dropped to $4,820 from $5023. The average profit was 61.3rnbasis points compared to 15.4 basis points in 2008.  </p

Mortgage subsidiaries of banks and thriftsrndid much better than independent mortgage originators, averaging 79.5 basisrnpoints per loan compared to 54.9 basis points for their independentrncompetitors.</p

“Production profits increased in 2009 overrn2008 as higher origination volumes, particularly in refinancing, reducedrnper-loan production expenses,” said Marina Walsh, MBA's Associate VicernPresident of Industry Analysis.  “It was also clear bank and thriftrnsubsidiaries had an advantage over independent mortgage companies because ofrnlower loan officer compensation per loan and higher net interest spread due tornlower warehouse funding costs and the ability to keep loans in warehousernlonger.” </p

Thernreport also found that: </p<ul

  • The averagernproduction volume for each firm was $933 million in 2009, compared to $500rnmillion in 2008.</li
  • The averagernpull-through rate (number of loan actually closed relative to the number of applications)rnimproved to 68.44 percent in 2009, from 56.59 percent in 2008. </li
  • The drop in loanrnproduction expenses, the “net cost to originate” dropped to $1,628 per loan inrn2009 from $2,291 in 2008. This figure includes all origination operatingrnexpenses and commissions minus all fee income, but excludes secondary marketingrngains, capitalized servicing, servicing release premiums and warehouse interestrnspread. </li
  • The combination ofrnnet marketing income and origination fees averaged 208 basis points in 2009,rncompared to 211 basis points in 2008. </li
  • 96 percent of thernfirms in the study posted pre-tax net financial profits in 2009, versus just 59rnpercent in 2008, and pre-tax net financial income was $4.9 million in 2009,rncompared to $0.7 million in 2008.</li
  • For the thirdrnstraight year, net warehousing income (the net interest spread between thernmortgage rate on a loan and the interest paid on a warehouse line of credit)rndropped, to $116 per loan in 2009 from $148 per loan in 2008, and $175 per loanrnin 2007. Likewise, the average days in warehouse dropped to 14 days in 2009,rnfrom 15 days in 2008 and 20 days in 2007. </li

    All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of is prohibited.

  • About the Author


    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

    See all blogs


    Leave a Comment

    Leave a Reply

    Latest Articles

    Real Estate Investors Skip Paying Loans While Raising Billions

    By John Gittelsohn August 24, 2020, 4:00 AM PDT Some of the largest real estate investors are walking away from Read More...

    Late-Stage Delinquencies are Surging

    Aug 21 2020, 11:59AM Like the report from Black Knight earlier today, the second quarter National Delinquency Survey from the Read More...

    Published by the Federal Reserve Bank of San Francisco

    It was recently published by the Federal Reserve Bank of San Francisco, which is about as official as you can Read More...