Mortgage bankers' profits on loan production fell from $258 per loan in 2005 to minus $50 last year, according to the annual cost study from the Mortgage Bankers Association.
Revenues per loan actually increased but that did not cover the production cost of $3,416 per loan, a 17 percent increase, the report said. The higher costs stemmed partly from fewer new loans and also personnel costs.
"Despite some companies' best efforts to boost production revenues through the origination of higher-yielding mortgage products, several factors worked against the industry as a whole . . . ," said Marina Walsh, a senior director in MBA's research and economics department. "Servicing profits in 2006 partially offset production losses, but even these profits declined from 2005 levels due to mortgage servicing hedge losses."
Last year was when the subprime mortgage woes began affecting the economy. Borrowers defaulted as higher interest rates set in, and lenders backed away from "creative" loans to at-risk borrowers.
Also in the report, the average firm posted pre-tax net financial income of $6.4 million in 2006, compared to $26 million in 2005, and retail sales productivity averaged 62 loans per loan officer in last year, compared to 83 loans per loan officer in 2005.