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MBA: Third Quarter Independent Mortgage Banker Profits Increase

December 18, 2012

Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $2,465 on each loan they originated in the third quarter of 2012, up from $2,152 per loan in the second quarter, the Mortgage Bankers Association (MBA) reported. “Both purchase volume and refinancing volume increased in the third quarter, resulting in higher net production profits among independent mortgage bankers,” said Marina Walsh, MBA associate vice president of industry analysis. “Secondary marketing gains improved by 14 basis points over the second quarter. However, per loan expenses remained flat despite higher volumes.” 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 120 basis points in the third quarter, compared to 107 basis points in the second quarter.
  • Average production volume was $450 million per company in the third quarter, up from $371 million per company in the second quarter. The average volume by count per company rose to 2,010 loans in the third quarter, from 1,700 in the second quarter.
  • The refinancing share of total originations, by dollar volume, was 57 percent in the third quarter, up from 52 percent in the second quarter. For the mortgage industry as whole, MBA estimates the refinancing share at 73 percent in the third quarter of 2012, up from 67 percent in the second quarter.
  • Measured in basis points, secondary marketing income increased to 271 basis points in the third quarter, compared to 257 basis points in the second quarter.
  • Total loan production expenses—commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations—increased slightly to $5,163 per loan in the third quarter, from $5,128 in the second quarter.
  • Personnel expenses averaged $3,320 per loan in the third quarter, from $3,246 per loan in the second quarter.
  • The "net cost to originate" was $3,353 in the third quarter, from $3,224 per loan in the second 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.
  • Productivity improved to 3.9 loans originated per production employee per month in the third quarter, from 3.6 in the second quarter.
  • 97 percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2012, compared to 95 percent in the second quarter.



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