Even though mortgage bankers are still enjoying the steepest yield curve in years, lenders saw their average profit per loan fall to $606 in the first quarter, a 40% drop from the same period last year, according to new figures released by the Mortgage Bankers Association.

Compared to the fourth quarter, the average profit per loan originated fell by 32%.

MBA blamed the fall-off on both declining origination volume and higher production expenses. The trade group said the "average" nonbank mortgage lender (or a subsidiary of a depository) funded $158 million of loans during 1Q compared to $217 million the previous quarter. (Figures compiled by National Mortgage News and the Quarterly Data Report found that the industry, as a whole, originated $328 billion of product in 1Q, a 21% decline.)

Production operating expenses rose to $5,147 per loan in the first quarter of 2010 compared to $4,402 per loan in 4Q, MBA says in its first quarter production survey.

"It is extremely difficult for mortgage companies to effectively manage staffing levels," said Marina Walsh, MBA's associate vice president of industry analysis. "Either companies are stretching to meet the incredible demand, or they are carrying excess capacity which drives up per-loan personnel expense.

She added that, "Despite this challenge as originations declined in the first quarter, the independents and bank subsidiaries still produced an average of thirty two basis points of production profit, primarily resulting from higher secondary marketing gains."

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