GG - I checked the Mortgage Bankers website and found this article regarding profitability. You may be a bit high in your estimates of the profits from mortgage banking. I was unable to find anything on 1997 profitability.
mbaa.org
WASHINGTON, D.C. -- The Mortgage Bankers Association of America (MBA) today announced the results of a comprehensive study conducted among 213 mortgage banking companies to determine income and costs for originating and servicing one-to-four unit residential loans in 1996.
The 1996 Cost Study shows that the average industry firm had a profit margin (net income divided by gross income) of 12.3 percent, up from 9.9 percent in 1995. Net operating margin (profit margin before sale of servicing) was 9.6 percent in 1996, up from 5.7 percent in 1995.
"While the relatively strong core earnings of the average mortgage company marks the second straight year of recovery, it disguises the fact that there were some big winners along with those companies who didn't fare so well," said David Lereah, MBA's chief economist. "The bottom line is that we are still in a fiercely competitive environment which means we are likely to see more consolidation and exits from the industry."
Key highlights of the 1996 Cost Study include:
For the second consecutive year firms servicing between $1 billion and $3.9 billion were the most profitable servicer size group with an average profit margin of 25.9 percent and an average net operating margin of 23.5 percent in 1996.
Servicing productivity jumped to 1,134 loans serviced per servicing employee in 1996 from 796 in 1995. This increase was driven by average servicing portfolio growth, continued efficiency improvements from application of technology, increased subservicing activity, and the growth of second mortgage servicing activity.
The average firm serviced 947 first mortgages per employee in 1996 compared to 700 in 1995. The average firm serviced 86,721 first mortgage loans in 1996 in addition to 9,703 second, construction, and other loans secured by single-family properties.
Direct cost of servicing a loan fell to $85 in 1996 from $100 in 1995. The largest servicers, firms servicing over $20 billion, incurred $81 in direct cost per loan serviced making them the most efficient size group. Servicers with $4 billion to $20 billion
reported a direct cost of $85 per loan serviced.
The average firm in the sample reported that a 47 percent share of its loan production volume came from purchased production in 1996, up from 43 percent in 1995 and the highest share ever reported.
The average firm incurred a net loss of $913 per loan originated in 1996, down from $983 a year earlier. The majority of the loss was recovered through net marketing income which averaged $664 per loan in 1996, up from $433 per loan in 1995. Net marketing is expected to continue increasing now that FAS 125 is in effect.
The 1996 Cost Study is available for purchase from the MBA Economics Department at 202-861-6995.
***SPECIAL NOTE***
The 1996 Cost Study includes 213 mortgage banking companies that originated nearly 70 percent of all mortgage banking company one-to-four unit residential loan volume and over 40 percent of total industry volume in 1996. The sample firms also service more than 87 percent of the loans serviced by mortgage banking companies and more than 43 percent of all single-family loan volume outstanding. The 1996 Cost Study reports pre-tax and pre-FAS 91 results on single-family
business only.
Al |
