Magazine article Mortgage Banking

Mortgage Origination Profits Plummet in 2004

Magazine article Mortgage Banking

Mortgage Origination Profits Plummet in 2004

Article excerpt

MORTGAGE BANKING PRODUCTION PROFITS fell to $657 per loan in 2004 from $1,272 per loan in 2003, according to the Mortgage Bankers Association's (MBA's) annual cost study.

As volume declined in 2004, per-loan operational costs increased and were only partially offset by increases in secondary marketing income, including servicing values, according to MBA.

MBA's 2005 Cost Study was based on 2004 data and was the 27th in an annual series of reports on the income and expenses associated with the origination and servicing of the one-to-four-unit residential mortgage loans by mortgage banking companies. It is based on income statement data from 225 companies representing an estimated 47 percent of total residential industry volume in 2004.

"The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability," said Doug Duncan, MBA's chief economist and senior vice president of research and business development.

"Narrowing warehouse interest spreads, increased pricing pressures, and higher sales and fulfillment costs on a per-loan basis posed challenges for mortgage bankers," said Duncan. "But at the same time, we did see recoveries in the area of servicing--after three years of worsening losses, servicing operations posted a profit in 2004 on a per-loan basis."

According to the study:

* Overall, the average firm posted pretax net financial income of $23 million in 2004, a decline from the previous three years. …

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