Mortgage banker profits squeezed as volumes drop

by Kelli Rogers28 Jun 2013
Profits for independent mortgage banks took a hit in the first quarter as volumes flagged, according to the Mortgage Bankers Association (MBA).
Independent mortgage banks and mortgage subsidiaries of chartered banks took in an average profit of $1,772 on each loan they originated in Q1, down from $2,256 per loan in Q4 2012.
“The average firm’s production volume dropped about 10% in the first quarter. On a per-loan basis, the combination of lower revenues and rising costs resulted in lower profits compared to the previous three quarters,” said Marina Walsh, associate VP of industry analysis at MBA. “Nonetheless, the margins remain strong in comparison to other quarters since 2008.”
Meanwhile, total production expenses, including commissions, compensation, occupancy and equipment, and other expenses and corporate allocations, increased to $5,779 per loan, up from $5,603. 
The net cost to originate also rose, climbing to $4,182 from $3,813 in the previous quarter. That cost 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.
On the production side, average volume was $442 million per company in Q1, down $46 million from the prior quarter. The average volume count per company was also down, falling from 2,132 loans to 1,954.


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