U.S. Mortgage Banker Production Profits Improve in Q1

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According the Mortgage Bankers Association, independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,654 on each loan they originated in the first quarter of 2012, up from $1,093 per loan in the fourth quarter of 2011.

"For independent mortgage bankers, average production volume and the purchase share of that volume remained relatively constant in the first quarter, compared to the previous quarter.  Independent mortgage bankers remained focused on purchase production while many larger banking institutions were handling significantly more refinancing activity," said MBA Associate Vice President of Industry Analysis Marina Walsh. "While per-loan production expenses increased, secondary marketing gains improved as primary-secondary spreads widened.  Secondary marketing income rose from $4,355 per loan in the fourth quarter of 2011 to $5,011 per loan in the first quarter of 2012."

Among the other key findings of MBA's Quarterly Mortgage Bankers Performance Report are:

• In basis points, the average production profit (net production income) was 82.41 basis points in the first quarter, compared to 58.49 basis points in the fourth quarter.

• Average production volume was $301 million per company in the first quarter, from $313 million per company in the fourth quarter of 2012.  On a repeater company basis, average production volume remained constant at $314 million per company.

• The refinance share of total originations, by dollar volume, was 58 percent in the first quarter, from 57 percent in the fourth quarter of 2012.  For the mortgage industry as whole, MBA estimates the refinancing share at 75 percent in the first quarter of 2012, from 78 percent in the fourth quarter of 2011.

• Measured in basis points, secondary marketing income increased to 243 basis points in the first quarter, compared to 215 basis points in the fourth quarter.

• Personnel expense increased to $3,350 per loan in the first quarter, compared to $3,226 per loan in the fourth quarter.

• Total production operating expenses - commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations - increased to $5,292 per loan in the first quarter, from $5,118 in the fourth quarter.

• The "net cost to originate" was $3,413 in the first quarter, up from $3,324 per loan in the fourth quarter. The "net cost to originate" 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.

• 93 percent of the firms in the study posted pre-tax net financial profits in the first quarter, compared to 78 percent in the fourth quarter.

MBA's Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions.

71 percent of the 311 companies that reported production data for the first quarter report were independent mortgage companies.