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.

  • The largest contributor to the bottom line was net secondary marketing income. Net secondary marketing income, which includes capitalized servicing, averaged $1,528 per loan in 2003.

  • Servicers of all sizes continued to struggle financially, largely due to heavy amortization of mortgage servicing rights. Per-loan servicing financial losses averaged $166 per loan in 2003.

  • The largest servicers continued to outperform their smaller peers operationally, with higher per-loan servicing fees and lower direct cost to service. The largest servicers also took bigger amortization and impairment hits.

  • Average servicing productivity measured as the number of loans serviced per servicing employee dropped to 1,032 loans in 2003, from 1,071 loans in 2002.

The data for this report was primarily derived from the Mortgage Bankers Financial Reporting “WebMB” Form, a multi-agency form administered by MBA, Fannie Mae, Freddie Mac and Ginnie Mae. The 190 mortgage banking companies in the 2004 Cost Study sample originated an estimated 68 percent of total residential industry volume in 2003.


Send tips or a Letter to the Editor to samantha@inman.com or call (510) 658-9252, ext. 140.

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