Profits of independent mortgage banks and mortgage subsidiaries of chartered banks rose by more than $300 per loan in the third quarter of 2012 the Mortgage Bankers Association (MBA) said today.  Increased volumes of applications for both purchasing and refinancing and secondary market gains resulted in an average profit of $2,465 on each loan originated in the quarter compared to $2,152 in the second quarter.

In basis points, the average production profit (net production income) was 120 basis points in the third quarter, compared to 107 basis points in the second quarter. Secondary marketing income increased to 271 basis points in the third quarter, compared to 257 basis points in the second quarter.

There was only a small increase in total loan production expenses, from $5,128 in the second quarter to $5,163 in the third.  Total production expenses include commissions, compensation, occupancy and equipment, and other production expenses and corporate allocations.  Personnel expenses averaged $3,320 per loan in the third quarter, up from $3,246 per loan in the second quarter.

The "net cost to originate" was $3,353 in the third quarter, from $3,224 per loan in the second quarter. The "net cost to originate" includes all total production operating expenses minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.

Average production volume was $450 million per company compared to $371 million in the second quarter.  Companies originated an average of 2,010 loans, 310 more than the average in the second quarter.  Productivity improved to 3.9 loans originated per production employee per month in the third quarter, from 3.6 in the second quarter.

The refinancing accounted for 57 percent of the dollar volume of total originations in the third quarter, up from 52 percent in the second quarter. For the mortgage industry as whole, MBA estimates the refinancing share at 73 percent in the third quarter of 2012, up from 67 percent in the second quarter.

There were 311 companies reporting production data for the third quarter 70 percent of which were independent mortgage companies.  Ninety-seven percent posted pre-tax net financial profits in the third quarter of 2012, compared to 95 percent in the second quarter.