MBA: Purchase Activity Fuels 66% Jump in Mortgage Production Profit

The Mortgage Bankers Association (MBA) released its Second Quarter 2011 Mortgage Bankers Performance Report this week, which reveals an improvement in production profit, fueled by heavier purchase activity.

Independent mortgage banks and subsidiaries made an average profit of $575 on each loan they originated in the second quarter, an improvement from the first quarter’s $346 per loan, the report shows.

“Contrary to overall MBA industry data in which estimated production volume declined, the average firm in our study of independents and subsidiaries experienced volume growth. The firms in our study were able to more quickly adjust to a purchase-focused mortgage market environment after a significantly refi-heavy fourth quarter of 2010,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis, in a statement. “At the same time, secondary marketing gains improved as spreads between ten-year Treasuries and 30-year mortgage rates began to widen towards the end of the second quarter.”

Average production volume for the quarter rose to $174 million per company, up 6% from the first quarter’s $164 million, with the MBA estimate for overall quarterly industry origination volume at $290 billion for the second quarter, less than the $302 billion estimate for the first quarter.

At the same time, total production operating expenses, which include commissions, compensation, occupancy and equipment and other production expenses and corporate allocations, dropped to $5,644 per loan in the second quarter, compared to the previous quarter’s $5,837 per loan.

Average loan balances for the period rose somewhat, to $197,039, slightly more than $196,456 in the first quarter.

Refinancing volume dipped significantly in the second quarter, taking up 36% of the dollar volume of total originations, compared to fully half of the previous quarter’s volume. The MBA estimate for overall industry refinancing share was 62% for the quarter, slightly down from the first quarter’s 65% estimate.

Written by Alyssa Gerace

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