MBA: Cost To Originate A Mortgage Hit New Peak In Q1 At $8,887 Per Loan


Mortgage lenders made a little less profit per loan during the first quarter, due mainly to higher operating expenses.

According to the Mortgage Bankers Association’s (MBA) quarterly performance report, lenders saw a net gain of $224 on each loan they originated in the first quarter – down from $575 in the fourth quarter.

The drop was due mainly to higher per-loan production expenses. These expenses – which include commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a study high of $8,887 per loan in the first quarter, which is up from $7,562 in the fourth quarter.

For comparison purposes, the average cost to originate a loan in 2008 was about $5,985, according to the MBA’s data.

Personnel expenses in the first quarter averaged $5,802 per loan – up from $5,001 per loan in the fourth quarter.

Marina Walsh, vice president of industry analysis for the MBA, says that although “higher production revenues mitigated a portion of the cost increase, production profitability, nonetheless, declined by more than half the previous quarter.”

“For those mortgage bankers holding mortgage servicing rights [MSRs], an increase in mortgage interest rates resulted in MSR valuation gains and helped overall profitability,” Walsh says in a statement.

Of the 342 companies that reported production data for the first quarter, the average production volume was about $455 million per lender. That’s down from $690 million per company in the fourth quarter.

Average volume by count per company was 1,944 loans, down from 2,811 loans in the fourth quarter.

The average pre-tax production profit was 10 basis points (bps), down from an average net production profit of 24 bps in the fourth quarter. Since the inception of the performance report in the third quarter of 2008, net production income has averaged 51 bps.

The purchase share, by dollar volume, was 68% in the first quarter compared with 58% in the fourth quarter. For the mortgage industry as a whole, the MBA estimates that purchase share in the first quarter averaged 59%.

The average loan balance for first mortgages was $242,949 in the first quarter – down from $246,473 in the fourth quarter.

The average pull-through rate (loan closings to applications) was 70%, down from a study high of 76% in the fourth quarter.

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Joel Fleischman
Joel Fleischman
6 years ago

What drives the costs up?