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MBA's 2004 Cost Study Released; Strong Production Margins Continued to Fuel Overall Profitability in 2003

November 11, 2004

The Mortgage Bankers Association (MBA) has released its 2004 Cost Study. The study analyzes trends in income, expense, productivity and profitability for one-to-four-unit residential mortgage operations through 2003. Overall, the study shows that the net cost of originating a loan decreased in 2003. As in the previous two years, favorable warehousing interest spread and secondary marketing gains continued to offset losses from write-downs in servicing right values and the amortization of servicing rights.

Highlights from the study include:

  • On a per-loan basis, the net cost of originating a loan (origination fees less associated expenses such as loan officer and broker commissions, overhead and production support expenses) was $739 per loan--26 percent less than in 2002.
  • Mortgage banks with the highest average percentage of purchased production had the lowest net cost to originate, at $480 per loan.
  • Mortgage banks with the largest volume had the lowest net cost to originate, at $713 per loan.
  • Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest rate paid on a warehouse line of credit, averaged $516 per loan in 2003, consistent with 2002.
  • The largest contributor to the bottom line was net secondary marketing income. Net secondary marketing income, which includes capitalized servicing, averaged $1,528 per loan in 2003.
  • Servicers of all sizes continued to struggle financially, largely due to heavy amortization of mortgage servicing rights. Per-loan servicing financial losses averaged $166 per loan in 2003.
  • The largest servicers continued to outperform their smaller peers operationally, with higher per-loan servicing fees and lower direct cost to service. However, the largest servicers also took bigger amortization and impairment hits.
  • Average servicing productivity measured as the number of loans serviced per servicing employee dropped to 1,032 loans in 2003, from 1,071 loans in 2002.


The data for this report was primarily derived from the Mortgage Bankers Financial Reporting "WebMB" Form, a multi-agency form administered by MBA, Fannie Mae, Freddie Mac and Ginnie Mae. The 190 mortgage banking companies in the 2004 Cost Study sample originated an estimated 68 percent of total residential industry volume in 2003.

Source: MBA



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