Originators see dent to profit as production costs rise

by Adam Smith03 Sep 2013

Origination profits have fallen as production costs rise, new data has revealed.

Figures from the Mortgage Bankers Association show independent mortgage banks and mortgage subsidiaries of chartered banks saw a decline in profitability in the second quarter of 2013. The average profit per loan originated fell to $1,528, down from $1,772 per loan in the first quarter. MBA associate vice president of industry analysis Marina Walsh put the decline down to growing production costs.

"Per-loan production costs continue to rise and there are signs of pricing pressure as evidenced by the reduction in secondary marketing income," Walsh said.

Indeed, production costs were up slightly for the quarter. Total production expenses, including commissions, compensation, occupancy, equipment andd other production expenses, rose from $5,779 per loan in the first quarter to $5,818 per loan.

Walsh also said that, while overall volumes remained flat, there was a shift toward purchase originations. The purchase share of originations by dollar volume rose to 52% in the second quarter, up from 40% in the first quarter. It marks the first time the purchase share of originations has topped 50% since the third quarter of 2011.