Lenders Lost More than $500 per Loan Last Year

October 7, 2008 No Comments »


Mortgage lenders lost an average of $560 on each loan they originated in 2007, up from a loss of $50 per loan in 2006, according to the latest Cost Survey from the Mortgage Bankers Association.

The group noted that loan origination and ancillary fees increased on a per-loan basis, but soft volume couldn’t hold off rising production operating costs, which grew seven percent to $3,663 per loan.

The “net cost to originate,” which includes origination operating costs and commissions less all fee income, was $2,655 last year, up from $2,476 in 2006.

The formula excludes secondary market gains, capitalized servicing, servicing released premiums (similar to a mortgage broker‘s yield spread premium), and warehouse interest spread.

Net marketing income, which includes the gain or loss on the sale of a loan on the secondary market, along with capitalized servicing and released premiums, averaged $1,920 per loan, down from $2,180 a year earlier.

The average retail loan officer produced 57 loan transactions last year, down from 62 loans per loan officer in 2006 (not sure how wholesale fared).

Overall, the average mortgage lender in the study posted pre-tax net financial income of $0.9 million in 2007, compared with $6.4 million in 2006.

The study is based on a sample of 180 mortgage companies that originate and service home loans.

(photo: antigallerysf)

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