Magazine article Mortgage Banking

Strong Production Margins Continue to Fuel Overall Profitability

Magazine article Mortgage Banking

Strong Production Margins Continue to Fuel Overall Profitability

Article excerpt

MBA HAS RELEASED ITS 2004 COST STUDY, showing that overall, the net cost of originating a loan decreased in 2003. As in the previous two years, favorable ware-housing interest spread and secondary marketing gains continued to offset losses from write-downs in servicing right values and the amortization of servicing rights.

According to the study:

* 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. …

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