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Mortgage loan profits edge down as costs rise: MBA

Independent mortgage banks and mortgage subsidiaries of chartered banks experienced a drop in profits from newly originated loans in the fourth quarter of 2012 despite higher origination volumes.

Still, when compared to last year, loan profits have almost doubled in 12 months.

New data from the Mortgage Bankers Association says banks made on average $2,256 from each loan originated in 4Q, dropping from $2,465 per loan in the third quarter.

Compared to last year, profits are on the rise, with the surveyed banks previously making an average of $1,093 per loan, according to a previous MBA report.  

"Per-loan profits decreased in the fourth quarter, primarily driven by rising costs," said Marina Walsh, MBA associate vice president of industry analysis.

She explained, "Historically, production costs have dropped with rising volume. In this quarter, however, despite high origination volumes, per-loan costs reached the highest levels we have seen in this study, other than during the first half of 2011, when origination volume was 60% lower."

The average production volume climbed to $488 million per company, up from $450 million in the third quarter, the data revealed. Additionally, the average volume by count per company escalated to 2,132 loans, rising from 2,010 in the third quarter.

Even with the surge in volume, total loan production expenses hiked to $5,603 per loan, from $5,163 in the third quarter. Personnel expenses averaged $3,813 in the fourth quarter, rising from $3,353 in the previous period.

The net cost to originate a mortgage also increased to $3,813, from $3,353 in 3Q, the MBA said.

The data was comprised of 311 companies reporting production data for the fourth quarter, with 72% of the surveyed firms classified as independent mortgage companies.









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