Press Release - Performance Report


Title: MBA: Third Quarter Mortgage Banker Production Profits Improved with Higher Origination Volumes and Favorable Secondary Gains
Source:   MBA
Date: 12/8/2011

WASHINGTON, DC (December 8, 2011) – Independent mortgage banks and subsidiaries made an average profit of $1,263 on each loan they originated in the third quarter of 2011, up from $575 per loan in the second quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Third Quarter 2011 Mortgage Bankers Performance Report released today.

“Higher volume helped profitability as production costs were spread over a greater number of loans,” said Marina Walsh, MBA's Associate Vice President of Industry Analysis.  “Third quarter production expenses dropped on a per-loan basis as volume rose, although expenses remained high by historical standards when compared to other quarters with similar volume.”

Walsh continued, “At the same time, secondary marketing income rose from $4,006 per loan in the second quarter of 2011 to $4,563 per loan in the third quarter of 2011.  Secondary marketing gains improved as primary-secondary spreads widened in the third quarter.”

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 66.37 basis points in the third quarter of 2011, compared to 32.86 basis points in the second quarter of 2011. This was the most favorable quarterly result in production since the refinancing wave in the third quarter of 2010, when net profits were 71.46 basis points.

• Average production volume was $237 million per company (or 1,114 loans per company) in the third quarter of 2011, up from $174 million per company (or 866 loans per company) in the second quarter of 2011.

• The refinance share of total originations, by dollar volume, for this sample of independent mortgage bankers and bank subsidiaries was 45 percent in the third quarter of 2011, compared to 36 percent in the second quarter of 2011.

• Average borrower FICO scores rose to 734 in the third quarter of 2011 from 729 in the second quarter of 2011.

• Measured in basis points, secondary marketing gains increased to 229 basis points in the third quarter of 2011, compared to 210 basis points in the second quarter of 2011.

• Personnel expense decreased to $3,317 per loan in the third quarter of 2011, compared to $3,561 per loan in the second quarter of 2011. 

• Total production operating expenses - commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations - dropped to $5,315 per loan in the third quarter of 2011, compared to $5,644 in the second quarter of 2011.

• The "net cost to originate" decreased to $3,360 in the third quarter of 2011, from $3,513 per loan in the second quarter of 2011.  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.

• 86 percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2011, compared to 70 percent in the second quarter of 2011.

MBA's Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions.

Over 72 percent of the 311 companies that reported production data for the third quarter report were independent mortgage companies.

There are five performance report publications per year: four quarterly reports and one annual report. 

For media inquiries please contact Matt Robinson at (202) 557-2727 or mrobinson@mortgagebankers.org.

To purchase or subscribe to the publications, call (202) 557-2879.  The reports can also be purchased on MBA's website by clicking here.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:   www.mba.org.