Magazine article Mortgage Banking

Mortgage Originations Fuel First-Half 2001 Industry Profitability. (Business Alert)

Magazine article Mortgage Banking

Mortgage Originations Fuel First-Half 2001 Industry Profitability. (Business Alert)

Article excerpt

ACCORDING TO FIGURES FROM THE LATEST Peer Group Roundtables conducted by the MBA and The STRATMOR Group, mortgage industry profitability margins during the first half of 2001 exceeded 1999 and 2000 levels due to significant gains in loan production profits. However, servicing profits dropped, due to increased impairment and amortization of servicing rights. In terms of total mortgage industry profitability, the weighted average return on required equity increased to 19.6 percent from 15.8 percent in 2000 and 19.1 percent in 1999. The increase in overall profitability is attributed to the dramatic increase in loan refinancing volume, especially during the second quarter of 2001. Industrywide, mortgage originations totaled $396 billion for first-quarter 2001 and $502 billion for second-quarter 2001, with the refinancing share at 55 percent and 50 percent, respectively.

On the production side--including warehousing and secondary marketing operations--fully loaded pretax weighted average production margins rose to 66 basis points in first-half 2001 from 6 basis points in 2000. The 2001 production margin exceeded the average margin of 51 basis points earned in 1998 by 15 basis points. …

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