Independent mortgage banks and subsidiaries increased their loan profits by an average of $500 in the third quarter compared to the second quarter.

There was an average profit of $1,423 on each loan 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. The increase was a result of higher secondary marketing gains that increased from $3,455 per loan in the second quarter to $4,069 per loan in the third quarter.

"Treasury rates declined further during the third quarter 2010, driving down mortgage interest rates, which caused those who were on the fence about refinancing to finally take the plunge" said Marina Walsh, MBA associate vice president of industry analysis. "Historically, higher origination volume translates into a lower cost to originate per loan …. [which] has been particularly true during refinancing waves. However, with stricter lending standards in place, higher volume did not result in lower origination costs in the third quarter 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 second quarter."

Key findings of the report include:

• The refinance share of total originations rose to 57 percent, compared to 35 percent in the second quarter 2010 and 44 percent in the third quarter 2009.
• The average pull-through was down to 68 percent from 72 percent in the second quarter of 2010, as lenders struggled to close the higher volume of refinance applications received.
• The "net cost to originate" increased to $2,720 per loan, from $2,611 per loan in the second quarter.
• Total personnel expense rose slightly to $3,034 per loan, compared to $3,017 per loan in the second quarter. In the third quarter 2009, personnel expenses averaged $2,770 per loan.