Small mortgage banking companies got hammered in the first quarter amid falling loan volumes and rising expenses.
Profits per loan dropped 66% as the refinancing boom came to an abrupt end in late January and managers rushed to cut payroll and other expenses.
Average per-loan profit was $346 in the first quarter, according to a survey by the Mortgage Bankers Association, down from a $1,082 profit in the fourth quarter and $608 in the first quarter a year earlier.
Meanwhile, expenses per loan rose from $4,930 in the fourth quarter to $5,837. The increase in expenses ate into first-quarter profits, said Marina Walsh, MBA's associate vice president of industry analysis.
The survey found 63% of the 329 respondents posted pretax profits for the first quarter, compared with 84% in the prior quarter.
It is not unusual for profits to take a hit at the end of a refinancing boom. However, it appears this downturn in profitability was more severe due to regulatory costs associated with loan officer compensation and overtime rules.
Refinancing volume stood at 50%, compared with 44% in the first quarter of 2010.