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Mortgage Banking Firms Report Strong Q4 Profitability

APR 5, 2012 11:00am ET
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Small mortgage banking companies benefited from a 32% jump in loan production from the third quarter to the fourth quarter, but profitability per loan was crimped by a slight drop in pricing in the secondary mortgage market, according to a new report by the Mortgage Bankers Association. 

MBA reported Thursday that the average profit on a loan originated in the fourth quarter was $1,093, compared to $1,263 in the previous quarter.

Despite the slide in per loan profit, average loan production was $313 million, compared to $237 million in the third quarter.

MBA associate vice president Marina Walsh noted that heavier refinancing activity in the fourth quarter translated into higher productivity for the 300 mortgage bankers that responded to the trade group's quarter survey. 

The "MBA Mortgage Bankers Performance Report" shows that personnel and operating expenses as well as the "net cost to originate" fell slightly during the fourth quarter as refinancings comprised 57% of originations, up from 45% in the third quarter.

"However, net secondary marketing income dropped to $4,355 per loan in the fourth quarter from $4,563 per loan in the third quarter, lowering overall profits," Walsh said.

Over 70% of the survey respondents are independent mortgage companies and others are subsidiaries of banks and thrifts.

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