Independent mortgage banks and subsidiaries made an average profit of $1,423 on each loan they originated in the third quarter – up from $917 per loan in the second quarter, according to the Mortgage Bankers Association's (MBA) 3rd Quarter 2010 Mortgage Bankers Performance Report.
Higher secondary marketing gains, which rose from $3,455 per loan to $4,069 over the same time period, pushed the increase in profits, offsetting further increases in the cost to originate a loan.
Low mortgage rates during the quarter encouraged borrowers ‘who were on the fence about refinancing to finally take the plunge,’ says Marina Walsh, the MBA's associate vice president of industry analysis.
‘Historically, higher origination volume translates into a lower cost to originate per loan.Â This has been particularly true during refinancing waves,’ Walsh says. ‘However, with stricter lending standards in place, higher volume did not result in lower origination costs in the third quarter of 2010. Although the average origination volume per company rose to $237 million in the third quarter from $197 million in the second quarter, direct loan production expenses rose to $4,539 per loan in the third quarter from $4,438 in the second quarter.’
The refinance share of total originations for the report's sample of independent mortgage bankers and subsidiaries rose to 57% in the third quarter of 2010, compared to 35% in the second quarter of 2010 and 44% in the third quarter of 2009.
The ‘net cost to originate’ – which 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 – increased to $2,720 per loan in the third quarter from $2,611 per loan in the second quarter.
SOURCE: Mortgage Bankers Association