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Loan profits fall steeply with surge in rates

Loan profits for nonbanks plummeted to end 2016, according to the Mortgage Bankers Association.

The net gain per loan averaged $575 in the fourth quarter, down from $1,773 in the previous quarter, the trade group said.

"Rapid increases in interest rates in the last two months of 2016 slowed mortgage activity in the fourth quarter, driving a significant decrease in loan production profits," MBA Vice President of Industry Analysis Marina Walsh said. 

The average production volume per company averaged $690 million, which was down from $764 million in the third quarter. By count, companies averaged 2,811 loans in the final three months of the year, down from 3,072 loans in the previous quarter.

Companies were squeezed in other ways.

Total production expenses increased to $7,562 per loan in the fourth quarter of 2016, from $6,969 in the third quarter, MBA reported.  

"Mortgage lenders reported a combination of both lower revenues and higher expenses. On the revenue side, secondary marketing income dropped as mortgage lenders wrestled with less favorable pricing and pipeline challenges,” Walsh said.

“At the same time, production expenses per loan rose as fixed costs were spread over fewer loans," she continued.  


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