In the second half of last year, mortgage bankers nationwide managed to make a marginal profit of $184 per loan on every loan originated in that period, an improvement over average per-loan losses in 2006 and 2007, according to the Mortgage Bankers Association’s annual Mortgage Bankers Performance Report.

Despite making more money per loan, however, the average mortgage banking firm posted pre-tax net income of just $700,000 in 2008, compared to $900,000 in 2007 and $6.4 million in 2006. Fifty-nine percent of the firms in the study posted pre-tax net financial profits. The remaining forty-one percent – primarily firms with asset sizes less than $10 million – posted overall net financial losses.

According to the MBA, the change in product mix towards government loans helped improve net marketing income in 2008 because of the higher revenues associated with the government servicing assets. Net marketing income includes the gain or loss on the sale of loans in the secondary market, pricing subsidies and overages, as well as capitalized servicing and servicing released premiums.

"Many independent mortgage companies and bank subsidiaries made radical changes in their product offerings in order to remain alive in 2008," said Marina Walsh, MBA’s associate vice president of industry analysis. "Among this group, the government share of total originations, mainly FHA loans, was 45 percent in the second half of 2008, compared to less than ten percent the year before.  Small and mid-sized mortgage bankers were able to quickly respond to changing secondary market conditions as they had the flexibility to realign their business models toward FHA business and it was a key to their profitability."