MBA: Mortgage Profits Dived in '04

The mortgage industry's average profit per loan declined by almost 50% in 2004, according to an annual cost study conducted by the Mortgage Bankers Association of America.The MBA cost study found that average loan production profits fell to $657 per loan in 2004, down from $1,272 in 2003. As loan production volume shrank, per-loan operational costs increased and were only partially offset by secondary marketing income, including loan servicing values. "The year 2004 marked a departure from the recent years of unprecedented mortgage activity and profitability," said Douglas Duncan, MBA chief economist and senior vice president. "Narrowing warehouse interest spreads, increased pricing pressures, and higher sales and fulfillment costs on a per-loan basis posed challenges for mortgage bankers. But at the same time, we did see recoveries in the area of servicing -- after three years of worsening losses, servicing operations posted a profit in 2004 on a per-loan basis." That servicing profit averaged $21 per loan last year, compared with a net loss of $166 per loan in 2003. The MBA can be found online at http://www.mortgagebankers.org.