During the fourth quarter of 2012, independent mortgage banks and mortgage subsidiaries of chartered banks recorded an average profit of $2,256 on each loan they originated, according to new data from the Mortgage Bankers Association (MBA). This is down from $2,465 per loan in the third quarter of last year.
In terms of basis points (bps), the average production profit (net production income) rose to 107 bps in the fourth quarter; during the third quarter, the average production profit was 120 bps. The refinancing share of total originations, as measured in dollar volume, grew to 61% in the fourth quarter from 57% in the third quarter. The MBA estimates that refinancing reflected 75% of the fourth quarter's activity, up from 73% in the third quarter.
‘Rising costs were the driving force behind lower profits in the fourth quarter,’ says Marina Walsh, the MBA's associate vice president of industry analysis. ‘Historically, production costs have dropped with rising volume. In this quarter, however, per-loan costs reached the highest levels we have seen for such high origination volume. The only period we saw per-loan costs this high was in the first half of 2011, when origination volume was 60 percent lower.’