Mortgage Bankers’ Profit Surged to $917 Per Loan in 2nd Quarter

Home salesIndependent mortgage bankers and their subsidiaries made an average profit of $917 on each loan originated in the second quarter of 2010, a hefty increase from $606 per loan in the first quarter, according to the Mortgage Bankers Association.
But the boost in profits may be short-lived. The surge was driven by the rush to take advantage of the homebuyer tax credit program, which ended in the spring.
Average production volume for each mortgage banking firm increased to $196.6 million in the second quarter, compared to $157.8 million in the first quarter of 2010, the MBA reported today.
“Higher production operating expenses typically are associated with purchase production compared to refinances,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis. “But in this case, fixed costs were spread out over more loans and lenders experienced higher pull-through rates. These factors help explain why operating expense dropped on a per-loan basis by $470 per loan between quarters.”
However, average profits in the second quarter of 2010 were significantly lower than in the second quarter of 2009.  That’s because a year ago the refinancing share was more than 60 percent, resulting in a lower per-loan operating cost of $3,414, compared to $4,677 in the second quarter of 2010.
Other key findings in the MBA quarterly report: 

  • 85 percent of the firms in the study posted pre-tax net financial profits in the second quarter of 2010, compared to 75 percent in the first quarter of 2010 — and 96 percent in the second quarter of 2009.
  • The purchase share of total originations rose to 65 percent in the second quarter of 2010, compared to 56 percent in th e first quarter of 2010 — and 38 percent in the second quarter of 2009.
  • The average “pull-through” – or the number of closings divided by the number of loan applications — was 72 percent in the second quarter of 2010, compared to 68 percent in the first quarter of 2010. 

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