Industry News

Net cost of real estate loan origination falls 26%

Study finds banks with largest volume had lowest costs

On a per-loan basis, the net cost of originating a loan last year was $739, according to the Mortgage Bankers Association's 2004 Cost Study. That's 26 percent less than what it cost in 2002. The cost is calculated as the origination fees less associated expenses such as loan officer and broker commissions, overhead and production support expenses. The study analyzes trends in income, expense, productivity and profitability for one- to four-unit residential mortgage operations through 2003. Other highlights of the study include: Mortgage banks with the highest average percentage of purchased production had the lowest net cost to originate, coming in at $480 per loan. Mortgage banks with the largest volume had the lowest net cost to originate – $713 per loan. Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest rate paid on a warehouse line of credit, averaged $516 per loan in 2003, consistent with 2002. ...