Mortgage bankers saw their profit per loan slide nearly a third as originations were down by nearly a quarter. But lenders are seeing better pricing execution in the secondary market.
Lenders earned an average of $606 on each loan originated during the first quarter, the Mortgage Bankers Association reported today in its 1st Quarter 2010 Mortgage Bankers Production Survey. The findings represent data submitted by independent mortgage bankers and subsidiaries.
Per-loan profits were higher in the fourth-quarter 2009 at $890. In the first-quarter 2009, earnings per loan were $1,088.
The decline was the result of lower production; average first-quarter originations fell to $158 million per firm from $217 million three months earlier. Retail sales employees originated an average of five loans per month, lower than the prior quarter’s seven.
But the next report is likely to show improved performance as second-quarter originations reported by Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. were higher than the first quarter.
Mortgage bankers were only able to close 68 percent of applications during the latest period, deteriorating from the fourth quarter’s 73 percent.
Also impacting per-loan profits were production operating expenses, which increased to $5,147 per loan from $4,402, and personnel expenses that rose to $3,296 per loan from $2,756.
“It is extremely difficult for mortgage companies to effectively manage staffing levels. Either companies are stretching to meet the incredible demand, or they are carrying excess capacity which drives up per-loan personnel expense,” explained MBA Associate Vice President of Industry Analysis Marina Walsh in the statement.
The net cost to originate, including all production operating expenses and commissions less all fee income, was up to $2,945 per loan from $2,345. Secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread are not included in the net cost to originate.
Walsh noted that secondary marketing gains helped lenders maintain a 32-basis-point production profit margin. Average secondary gains improved to $3,464 per loan from $3,110.
The share of profitable firms was barely changed, with three-quarters of firms posting pre-tax profits compared to 76 percent in the final quarter of last year.
