Refinancings caused loan production to spike in the fourth quarter but independent residential lenders experienced a 24% decline in how much they earned per loan, according to a new report from the Mortgage Bankers Association (MBA).

Moreover, Marina Walsh, MBA's associate vice president of industry analysis, noted that rising interest rates trimmed secondary market income, which fell to $3,870 per loan, from $4,069 in the third quarter.

Overall, profitability per loan dropped to $1,082 in the fourth quarter from $1,423 in 3Q.

The trade group's Mortgage Bankers Performance report represents mostly nonbank lenders but roughly 30% of the sample includes affiliates of commercial banks and thrifts.

The universe represented in the study includes 310 lenders, who, on average, originated $285.8 million in 4Q10, compared to $237.4 million in the third quarter.

"Rising interest rates during the fourth quarter, particularly in the month of December, had an adverse impact on net gain-on-sale for many independent mortgage bankers" Walsh said. MBA is expected to officially release its study on Wednesday. A preview copy was provided to National Mortgage News (NMN).

In an interview with ASR sister publication NMN, Walsh pointed out that mortgage rates rose 55 basis points from October through December. Hedging, she said, became critical in dealing with rate volatility and preserving the lender's expected return. "At the end of the day, it depends how effectively independent mortgage bankers were able to hedge their pipeline," she said.

According to figures compiled by NMN, all lenders funded $544 billion in single-family loans in 4Q10, a 22% jump from 3Q10.

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