Small mortgage banking companies suffered a 66% drop in profitability in the first quarter as the refinancing boom came to an abrupt end in January and managers rushed to cut payrolls and other expenses.
Average per loan profit was $346 in the first quarter, according to a survey by the Mortgage Bankers Association, down from a $1,082 profit in the fourth quarter.
Average loan production dropped 40% from the fourth quarter to $164 million in the first quarter for the 329 independent mortgage banks and subsidiaries of banks and thrifts that responded to the MBA survey.
With the drop in loan production, expenses per loan rose from $4,930 in the fourth quarter to $5,837. This $900 increase in expenses ate into first quarter profits, according to Marina Walsh, MBA's associate vice president of industry analysis.
Loan production expenses hit the "highest level ever reported in this study," she said.
Walsh started the quarterly profitability survey for MBA in 2008.
The survey also found that 63% of the respondent firms posted pre-tax profits for the first quarter, compared to 84% in the prior quarter.
