MBA study shows mortgage industry production profits fell again in 2007MortgagePress.comMBA, profits, statistics, Marina Walsh, losses, MBA 2008 Cost Study
Mortgage companies lost an average of $560 on every loan they
originated last year, a drop from the $50 per loan they lost in
2006, according to the Mortgage Bankers Association's (MBA) annual
cost study. While loan origination and ancillary fees grew on a
per-loan basis, they did not keep pace with increases in production
operating expenses, which grew seven percent to $3,663 per
loan.
"Once again, the drop in gross production operating expenses did
not keep pace with the drop in volume," said Marina Walsh,
associate vice president of research and economics of the MBA. "As
a result, production profits declined in 2007, a continuation of a
downward trend that began in 2004."
MBA's 2008 Cost Study is based on 2007 data and is the thirtieth
in an annual series of reports on the income and expenses
associated with the origination and servicing of one- to four-unit
residential mortgage loans by mortgage banking companies. The study
is based on a sample of 180 mortgage banking companies who
originate and service loans.
Study highlights include:
• Overall, the average firm in the Cost Study sample
posted pre-tax net financial income of $0.9 million in 2007,
compared to $6.4 million in 2006.
• On a per-loan basis, the "net cost to originate" was
$2,655 in 2007 compared to $2,476 in 2006. The "net cost to
originate" includes all origination operating costs and commissions
minus all fee income, but excludes secondary marketing gains,
capitalized servicing, servicing released premiums and warehouse
interest spread.
• Retail sales productivity averaged 57 loans per loan
officer in 2007, compared to 62 loans per loan officer in 2006.
• 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, dropped to $175
per loan, from $245 per loan in 2006, due to higher interest
expense on warehouse lines.
• Net marketing income, which includes the gain or loss on
the sale of loans in the secondary market, pricing subsidies and
overages, as well as capitalized servicing and servicing released
premiums, averaged $1,920 per loan in 2007 from $2,180 per loan in
2006.
• Servicing financial profits per loan rebounded to $109
per loan in 2007 primarily because of higher per-loan servicing
fees (driven by higher loan balances) and lower net losses
associated with mortgage servicing rights and hedging.
• Servicer productivity, measured as the number of loans
serviced per servicing employee, rose to 1,398 loans serviced per
servicing employee in 2007, most likely resulting from increased
use of outsourcing.
• The smaller servicers continued to struggle
operationally, with direct costs to service that averaged over
three times higher than the largest servicers.
The data for this report was primarily derived from the Mortgage
Bankers Financial Reporting Form (or WebMB), a multi-agency
reporting form administered by MBA, Fannie Mae, Freddie Mac and
Ginnie Mae.
For more information, visit www.mortgagebankers.org.
