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Small Independent Lenders Suffer a Sharp Drop in Profits

DEC 4, 2013 1:37pm ET
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Independent mortgage bankers have seen their per-loan income steadily decline over the past year but in the third quarter profitability took a steeper dive.

The average profit was $743 per loan, compared to $1,528 in 2Q, the Mortgage Bankers Association reported Tuesday.

“Third-quarter profits were reduced by half because of several factors: per-loan production expenses that reached survey highs, declining production volume and reduced secondary marketing income,” says Marina Walsh, MBA’s associate vice president of industry analysis.

Total loan production expenses including commissions, compensation, equipment and other production expenses increased to $6,386 in 3Q, up from $5,818 in 2Q.

The 333 mortgage companies in MBA’s survey on average originated $391 million in loans during 3Q, down just 11% from the prior quarter. The purchase mortgage share rose to 67% from 52% in 2Q.

“Historically, mortgage bankers have struggled to control fixed costs and right-size in a declining market, and the increasing costs of compliance and quality control only exacerbate an already difficult situation,” Walsh says.

Comments (1)
Bottom line is that lenders are going to have to raise rates to maintain decent margins otherwise there is no point of being in business in this industry. working for a few hundred bucks in profit per loan is useless time. Consumers will thank our goverment officials in the near future for making lending more expensive...........
Posted by CHRIS L | Wednesday, December 04 2013 at 3:23PM ET
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