Mortgage Bankers Profits Decline 32% in Q4

Mortgage bankers saw a 24% decline in loan profits from the third quarter to the fourth quarter of 2010, says a Mortgage Bankers Association (MBA) report released today.

The MBA 4th Quarter 2010 Mortgage Bankers Performance Report found that independent mortgage banks and subsidiaries made an average of $1,082 per loan originated in the fourth quarter, down from an average profit of $1,423 in Q3.

MBA attributed the downturn to lower net secondary marketing income that fell to $3,870 per loan (188 basis points) in Q4 2010, from $4,069 per loan (203 basis points) in the Q3 2010.

“Rising interest rates during the fourth quarter, particularly in the month of December, had an adverse impact on net gain on sale for many independent mortgage bankers” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis. “During the month of December, the average thirty-year fixed mortgage rate was 4.82%, about 37 basis points higher than in November and 55 basis points higher than in October. Considering such variables as the timing of rate locks, pull-through expectations, and hedging effectiveness, some mortgage bankers’ earnings were hurt by the rapid change in rate environment in the fourth quarter.”

The refinance share of total originations for the sample mortgage bankers and subsidiaries rose to 63% in the fourth quarter, compared with 57% in the third quarter and 45% in the year-earlier term.

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Written by Elizabeth Ecker

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