Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,093 on each loan they originated in the fourth quarter of 2011, down from $1,263 per loan in the third quarter of 2011, according to the Mortgage Bankers Association's (MBA) Fourth Quarter 2011 Mortgage Bankers Performance Report.
"The fourth quarter 2011 results were mixed for mortgage bankers," said Marina Walsh, MBA's associate vice president of industry analysis. "Mortgage volume increased in the fourth quarter, driven by heavier refinancing activity, translating into higher productivity. However, net secondary marketing income dropped to $4,355 per loan in the fourth quarter from $4,563 per loan in the third quarter, lowering overall profits."
Among the other key findings of MBA's Quarterly Mortgage Bankers Performance Report are:
►In basis points, the average production profit (net production income) was 58.49 basis points in the fourth quarter of 2011, compared to 66.37 basis points in the third quarter of 2011.
►Average production volume was $313 million per company in Q4 of 2011, up from $237 million per company in Q3 of 2011, with average loan balances increasing by about $5,000.
►The refinance share of total originations, by dollar volume, was 57 percent in Q4 of 2011, compared to 45 percent in Q3 of 2011.
►Measured in basis points, secondary marketing gains decreased to 215 basis points in Q4 of 2011, compared to 229 basis points in Q3.
►Personnel expense decreased to $3,226 per loan in Q4, compared to $3,317 per loan in the third quarter of 2011, due in part to the larger number of loans.
►Total production operating expenses, including commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations, dropped to $5,118 per loan in the fourth quarter of 2011, compared to $5,315 in the third quarter of 2011.
►The "net cost to originate" was $3,324 in the fourth quarter of 2011, from $3,360 per loan in the third quarter of 2011. 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.
►Seventy-eight percent of the firms in the study posted pre-tax net financial profits in the fourth quarter of 2011, compared to 86 percent in the third quarter of 2011.