Q2 Mortgage Banking Profits Surge, Highest Since Report Began in 2008

by devteam August 30th, 2012 | Share

Mortgage bankers sawrntheir profits surge during the second quarter of 2012, increasing from $1,654 onrneach loan originated in the first quarter of the year to $2,152.  The information comes from the MortgagernBankers Association’s (MBA) QuarterlyrnMortgage Bankers Performance Report which covers data from 305 independentrnmortgage banks and mortgage subsidiaries of chartered banks.  Ninety-five percent of the firms postedrnpre-tax net financial profits in the second quarter of 2012, compared to 93rnpercent in the first quarter. </p

MBA said that averagernproduction volume was $371 million per company in the second quarter, up fromrn$301 million per company in the first quarter. The average volume by count perrncompany rose to 1,700 loans in the second quarter, from 1,380 in the firstrnquarter.  Productivity improved to 3.6rnloans originated per production employee per month in the second quarter, fromrn3.3 in the first quarter.</p

“With the surge inrnproduction volume in the second quarter, net production profits amongrnindependent mortgage bankers increased, surpassing 100 basis points for the<bfirst time since inception of our report in 2008,” said MBA Associate VicernPresident of Industry Analysis Marina Walsh. “Secondary marketing gains</bimproved by almost 14 basis points over the first quarter, the result ofrnwidening spreads between the primary and secondary markets. With the record volume,rntotal production operating expenses also decreased by $164 per loan over thernfirst quarter."</p

In basis points, thernaverage production profit (net production income) was 107 basis points in thernsecond quarter, compared to 82 basis points in the first quarter and secondaryrnmarketing income increased to 257 basis points in the second quarter, comparedrnto 243 basis points in the first quarter.  </p

The “net cost tornoriginate” was $3,224 in the second quarter, down from $3,413 per loan inrnthe first quarter. The “net cost to originate” includes allrnproduction operating expenses and commissions minus all fee income, butrnexcludes secondary marketing gains, capitalized servicing, servicing releasedrnpremiums and warehouse interest spread.  Personnelrnexpense decreased to $3,246 per loan in the second quarter, compared to $3,350 inrnthe first quarter and total production operating expenses – commissions,rncompensation, occupancy and equipment, and other production expenses andrncorporate allocations – were $5,128 per loan in the second quarter compared to $5,292rnin the first quarter. </p

The purchase share ofrntotal originations, by dollar volume, was 48 percent in the second quarter, uprnfrom 42 percent in the first quarter. For the mortgage industry as whole, MBArnestimates the purchase share at 26 percent in the second quarter of 2012, fromrn25 percent in the first quarter.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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