Mortgage Banking Profits Improved in 2008

August 17, 2009 No Comments »


Mortgage bankers were able to bring in $184 in profit per loan originated in the second half of 2008, according to the Mortgage Bankers Association, thanks to a shift in product offerings.

“Many independent mortgage companies and bank subsidiaries made radical changes in their product offerings in order to remain alive in 2008,” said Marina Walsh, MBA’s Associate Vice President of Industry Analysis, in a statement.

“Among this group, the government share of total originations, mainly FHA loans, was 45 percent in the second half of 2008, compared to less than ten percent the year before.

The profits achieved in 2008 compare to per loan losses of $50 and $560 in 2006 and 2007, respectively.

Another reason firms were profitable last year could be attributed to the fact that non-profitable firms exited the market, leaving behind more opportunity for the successful players out there.

Also contributing were increases in loan origination and ancillary fees, which offset increases in production operating expenses.

The net cost to originate, which includes all origination expenses and commissions minus all fee income, fell to $2,291 per loan in 2008.

A the same time, loan servicing profits slipped into the red from a decent profit a year ago, thanks to mortgage servicing right impairments and an increase in refinancing.

The average pull-through rate, or the number of loan applications that actually closed, was 56.6 percent.

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