Costs Rise, Profits Fall on Mortgage Loans Originated in Q2

Profits on mortgage loan originations declined while the cost of originating a mortgage loan increased over the second quarter of this year, according to new data from the ""Mortgage Bankers Association"":http://mbaa.org/default.htm (MBA).

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The average profit on a mortgage loan originated at an independent mortgage bank or mortgage subsidiary of a chartered bank during the second quarter was $1,528. During the first quarter, profit per loan was $1,772.

""Per-loan production costs continue to rise and there are signs of pricing pressure as evidenced by the reduction in secondary marketing income,"" said Marina Walsh, associate VP of industry analysis at the MBA.

Measured in basis points, the profit per loan decreased from 86 to 75 over the quarter, according to the MBA.

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The total cost of originating a mortgage loan in the second quarter of this year was $4,207, compared to $4,182 in the previous quarter. This includes operating costs and loan officer commissions and accounts for fee income. The value does not account for secondary market income and other possible gains.

However, secondary marketing income also declined over the quarter, falling from 274 basis points per loan to 263.

Each loan required about $3,808 in personnel expenses in the second quarter, compared to $3,785 in the first quarter.

Each loan officer wrote an average of 2.9 loans per month, down from 3.1 per month in the previous quarter.

In total, independent banks and subsidiaries of chartered banks originated an average of 1,921 loans each in the second quarter, totaling $439 million at each institution.

This is down from 1,954 loans and $442 million per bank in the first quarter.

""While overall volume remained relatively flat, we are seeing a shift in product mix towards purchase originations,"" Walsh said.

In fact, for the first time since the third quarter of 2011, purchase originations accounted for a larger share of total originations than refinances.

MBA reported purchase originations made up 52 percent of the dollar volume of mortgage loans originated in the second quarter.