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MBA releases 2004 cost studyMortgagePress.comStudy,Production Margins,Cost,Profits
Strong production margins continued to fuel overall
profitability in 2003
The Mortgage Bankers Association has released its “2004
Cost Study.” The study analyzes trends in income, expense,
productivity and profitability for one- to four-unit residential
mortgage operations through 2003. Overall, the study shows that the
net cost of originating a loan decreased in 2003. As in the
previous two years, favorable warehousing interest spread and
secondary marketing gains continued to offset losses from
write-downs in servicing right values and the amortization of
servicing rights. Highlights from the study include:
†On a per-loan basis, the net cost of originating a loan
(origination fees less associated expenses, such as loan officer
and broker commissions, overhead and production support expenses)
was $739 per loan, 26 percent less than in 2002.
†Mortgage banks with the highest average percentage of
purchased production had the lowest net cost to originate, at $480
†Mortgage banks with the largest volume had the lowest net
cost to originate, at $713 per loan.
†Net warehousing income, which represents the net interest
spread between the mortgage rate on a loan and the interest rate
paid on a warehouse line of credit, averaged $516 per loan in 2003,
consistent with 2002.
†The largest contributor to the bottom line was net
secondary marketing income. Net secondary marketing income, which
includes capitalized servicing, averaged $1,528 per loan in
†Servicers of all sizes continued to struggle financially,
largely due to heavy amortization of mortgage servicing rights.
Per-loan servicing financial losses averaged $166 per loan in
†The largest servicers continued to outperform their
smaller peers operationally, with higher per-loan, servicing fees
and lower direct cost to service. However, the largest servicers
also took bigger amortization and impairment hits.
†Average servicing productivity, measured as the number of
loans serviced per servicing employee, dropped to 1,032 loans in
2003, from 1,071 loans in 2002.
The data for this report was primarily derived from the
“Mortgage Bankers Financial Reporting WebMB Form,” a
multi-agency form administered by MBA, Fannie Mae, Freddie Mac and
Ginnie Mae. The 190 mortgage banking companies in the “2004
Cost Study” sample originated an estimated 68 percent of
total residential industry volume in 2003.
For more information, visit www.mortgagebankers.org.
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