MBA: Average Loan Lost $50 in '06

Mortgage bankers lost an average of $50 on every loan they produced in 2006, compared with profits of $258 per loan in 2005, according to the Mortgage Bankers Association's annual cost study."Production profits began to slip in 2004, and we see a continuation of this trend in 2006," said Marina Walsh, a senior director in MBA's research and economics department. "Despite some companies' best efforts to boost production revenues through the origination of higher-yielding mortgage products, several factors worked against the industry as a whole -- the negative yield curve which increased the cost of funds, lower sales productivity and higher per-loan sales and fulfillment costs, particularly personnel-related costs. Servicing profits in 2006 partially offset production losses, but even these profits declined from 2005 levels due to mortgage servicing hedge losses." Production revenues increased, but so did production operating expenses, which were up 17%. The net cost to originate increased to $2,476 per loan in 2006, compared with $2,049 per loan in 2005. On the servicing side, per-loan financial profits averaged $58 in 2006, down from $104 in 2005.