Independent mortgage bankers and subsidiaries experienced an increase in profits during the second quarter of this year, according to a study released from the Mortgage Bankers Association.
The average profit was $917 on each loan originated, up from $606 per loan in the first quarter of 2010, according to the study. The increase was driven by a rise in the average production volume for each firm to $196.6 million in the second quarter of 2010, compared to $157.8 million in the first quarter of 2010. Because of this, production operating expenses decreased to $4,677 per loan, from $5,147 per loan in the first quarter of 2010.
"The significant rise in loan origination volume during the second quarter reflects the surge in first time homebuyers seeking to take advantage of the tax credit before the deadline expired," said Marina Walsh, MBA’s associate vice president of industry analysis. "Higher production operating expenses typically are associated with purchase production compared to refinances. But in this case, fixed costs were spread out over more loans and lenders experienced higher pull-through rates. These factors help explain why operating expense dropped on a per-loan basis by $470 per loan between quarters."
However, the MBA study did find that average profits in the second quarter of 2010 were significantly lower than the profits in the second quarter of 2009.
"A year before, quarterly production volume averaged $280.9 million and the refinancing share was over 60 percent," said Walsh. "The heavy volume and refinancing share helped lower per-loan operating costs to $3,414 per loan and profits soared to $1,358 per loan."
The study also found he purchase share of total originations rose to 65 percent from 56; the average pull-through was 72 percent, compared to 68 percent in the first quarter of 2010; the "net cost to originate" dropped to $2,611 per loan from $2,945; total personnel expense dropped to $3,017 per loan from $3,296; and 85 percent of the firms posted pre-tax net financial profits in the second quarter of 2010, compared to 75 percent in the first quarter of 2010 and 96 percent in the second quarter of 2009.
