Mortgage companies lost an average of $560 on every loan they originated last year, compared with the $50 per loan they lost in 2006, continuing a downward trend that began in 2004, according to the Mortgage Bankers Association’s annual cost study.

While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew 7 percent to $3,663 per loan, the study found.

Mortgage companies lost an average of $560 on every loan they originated last year, compared with the $50 per loan they lost in 2006, continuing a downward trend that began in 2004, according to the Mortgage Bankers Association’s annual cost study.

While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew 7 percent to $3,663 per loan, the study found.

MBA’s 2008 Cost Study is based on 2007 income and expenses associated with the origination and servicing of one- to four-unit residential mortgage loans by mortgage banking companies. The study is based on a sample of 180 mortgage banking companies who originate and service loans.

Study highlights include:

  • Overall, the average firm in the Cost Study sample posted pre-tax net financial income of $0.9 million in 2007, compared with $6.4 million in 2006.
  • On a per-loan basis, the "net cost to originate" was $2,655 in 2007, compared with $2,476 in 2006. The "net cost to originate" includes all origination operating costs and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.
  • Retail sales productivity averaged 57 loans per loan officer in 2007, compared with 62 loans per loan officer in 2006.
  • The smaller loan servicers continued to struggle operationally, with direct costs to service that averaged more than three times higher than the largest servicers.

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