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MBA Study Finds: Banker Production Rises as a Result of Refi Activity

Dec 14, 2010

Independent mortgage banks and subsidiaries made an average profit of $1,423 on each loan they originated in the third quarter of 2010, up from $917 per loan in the second quarter of 2010, according to the Mortgage Bankers Association (MBA)'s 3rd Quarter 2010 Mortgage Bankers Performance Report. More than 70 percent of the 307 companies that reported production data for this report were independent mortgage companies. The increase was driven by higher secondary marketing gains that increased from $3,455 per loan in the second quarter 2010 to $4,069 per loan in the third quarter 2010. The secondary marketing gains offset further increases in the cost to originate a loan. "Treasury rates declined further during the third quarter 2010, driving down mortgage interest rates, which caused those who were on the fence about refinancing to finally take the plunge" said Marina Walsh, MBA's associate vice president of industry analysis. "Historically, higher origination volume translates into a lower cost to originate per loan. This has been particularly true during refinancing waves. However, with stricter lending standards in place, higher volume did not result in lower origination costs in the third quarter 2010. Although the average origination volume per company rose to $237 million in the third quarter from $197 million in the second quarter, direct loan production expenses rose to $4,539 per loan in the third quarter from $4,438 in second quarter." Among the additional key findings of MBA's Quarterly Mortgage Bankers Performance Report are: ►The refinance share of total originations ($) for this sample of independent mortgage bankers and subsidiaries rose to 57 percent in the third quarter 2010, compared to 35 percent in the second quarter 2010 and 44 percent in the third quarter 2009. ►The average pull-through (the number of closings divided by the number of loan applications) was down to 68 percent from 72 percent in the second quarter of 2010, as lenders struggled to close the higher volume of refinance applications received. ►The "net cost to originate" increased to $2,720 per loan in the third quarter of 2010, from $2,611 per loan in the second quarter of 2010. The "net cost to originate" includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread. ►Total personnel expense rose slightly to $3,034 per loan in the third quarter of 2010, compared to $3,017 per loan in the second quarter of 2010. In the third quarter 2009, personnel expenses averaged $2,770 per loan. ►Eighty-eight percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2010, compared to 85 percent in the second quarter of 2010 and 82 percent in the third quarter of 2009. For more information, visit www.mortgagebankers.org.
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Dec 14, 2010
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