Jun 29, 2011

MBA: Small Co. Profits Down

According to a report in National mortgage news,

WASHINGTON—Small mortgage banking companies got crushed in the first quarter between falling loan volumes and rising expenses.

Profits per loan dropped 66% as the tail end of the fourth-quarter refinancing boom came to an abrupt end in late January and managers rushed to cut payroll 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 and $608 in the 2010 first quarter.

Meanwhile, expenses per loan rose from $4,930 in the fourth quarter to $5,837—which ate into first-quarter profits, according to Marina Walsh, MBA’s associate vice president of industry analysis.

The survey found 63% of the 329 respondent firms posted pretax profits for the first quarter, compared to 84% in the prior quarter.

It is not unusual for profits to take a hit at the end of the refinancing boom.

However, it appears this downturn in profitability was more severe due to regulatory costs associated with loan officer compensation and overtime rules.

Walsh pointed out that the first quarter of 2010 had a lot of similarities to the first quarter of this year. Loan production was nearly the same at $157,800 with refinancing volume was at 50%, compared with 44% in the first quarter of 2010.

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