Magazine article Mortgage Banking

MBA Says Production Profits Plunged in First-Quarter 2011

Magazine article Mortgage Banking

MBA Says Production Profits Plunged in First-Quarter 2011

Article excerpt

Average per-loan production profit in the first quarter of 2011 plummeted to just $346, down from $1,082 in the fourth quarter, according to the Mortgage Bankers Association (MBA). Fewer firms also ended up posting pretax net financial profits in the opening quarter of the year--just 63 percent versus 84 percent in last year's final quarter.

MBA's First Quarter 2011 Mortgage Bankers Performance Report also found average production volume in the first quarter was $164 million per company, down from $286 million in the fourth quarter of last year.

Of the 312 participating companies reporting production data for the first quarter, 72 percent were independent mortgage companies.

The fourth quarter saw heavy refinance volume that fell off substantially during the first quarter of this year. The refi share by dollar amount was 63 percent in the final quarter of 2010, falling to 50 percent in the first quarter, according to MBA.

Assessing the impact of slower volume on costs, Marina Walsh, MBA's associate vice president of industry analysis, said, "As in the past, mortgage companies had difficulty managing staff levels to reflect the drop in loan volume. This caused higher per-loan production costs. Even though overall revenues went up, they did not go up fast enough to offset the higher costs."

Other factors complicated the ability of mortgage companies to post higher profits on their origination operations. Walsh noted, "In the first quarter of 2011, changes in compensation plans and investor expectations are additional factors that likely drove up loan production expenses per loan to the highest levels ever reported for this study. …

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