Independent mortgage bankers and subsidiaries made an average profit of $1,135 on each loan they originated in 2009, compared to $305 per loan in 2008, according to the Mortgage Bankers Association (MBA)'s Annual 2009 Mortgage Bankers Production Survey. The increase was driven by a drop in total loan production expenses to $3,685 per loan in 2009 from $4,717 per loan in 2008. Total loan production income dropped slightly to $4,820 per loan in 2009 from $5,023 per loan in 2008.
The average profit was 61.3 basis points in 2009, up from 15.4 basis points in 2008, but differed widely by company type. The profit for mortgage subsidiaries for bank and thrifts averaged 79.5 basis points per loan, but only 54.9 basis points for independent mortgage companies.
"Production profits increased in 2009 over 2008 as higher origination volumes, particularly in refinancing, reduced per-loan production expenses," said Marina Walsh, MBA's associate vice president of industry analysis. "It was also clear bank and thrift subsidiaries had an advantage over independent mortgage companies because of lower loan officer compensation per loan and higher net interest spread due to lower warehouse funding costs and the ability to keep loans in warehouse longer."
Among the additional key findings of MBA's Quarterly Mortgage Bankers Performance Report are:
►96 percent of the firms in the study posted pre-tax net financial profits in 2009, versus just 59 percent in 2008.
►The average firm posted pre-tax net financial income of $4.9 million in 2009, compared to $0.7 million in 2008.
►The average production volume for each firm was $933 million in 2009, compared to $500 million in 2008.
►The average pull-through rate (number of loan closings to number of loan applications) improved to 68.44 percent in 2009, from 56.59 percent in 2008.
►As a result of the drop in loan production expenses, the "net cost to originate" dropped to $1,628 per loan in 2009 from $2,291 in 2008. The "net cost to originate" includes all origination operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing release premiums and warehouse interest spread.
►The combination of net marketing income and origination fees averaged 208 basis points in 2009, compared to 211 basis points in 2008.
►For the third straight year, net warehousing income (the net interest spread between the mortgage rate on a loan and the interest paid on a warehouse line of credit) dropped, to $116 per loan in 2009 from $148 per loan in 2008, and $175 per loan in 2007. Likewise, the average days in warehouse dropped to 14 days in 2009, from 15 days in 2008 and 20 days in 2007.
MBA's Mortgage Bankers Performance Report offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Almost 73 percent of the 219 companies that reported production data for this annual report were independent mortgage companies.
For more information, visit www.mortgagebankers.org.