“Once again, the drop in gross production operating expenses did not keep pace with the drop in volume,” said Marina Walsh, Associate Vice President of Research and Economics of the Mortgage Bankers Association. “As a result, production profits declined in 2007, a continuation of a downward trend that began in 2004.”

MBA's 2008 Cost Study is based on 2007 data and is the thirtieth in an annual series of reports on the income and expenses associated with the origination and servicing of one- to four-unit residential mortgage loans by mortgage banking companies. The study is based on a sample of 180 mortgage banking companies who originate and service loans.

Study highlights include:

• Overall, the average firm in the Cost Study sample posted pre-tax net financial income of $0.9 million in 2007, compared to $6.4 million in 2006.

• On a per-loan basis, the “net cost to originate” was $2,655 in 2007 compared to $2,476 in 2006. The “net cost to originate” includes all origination operating costs and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.

• Retail sales productivity averaged 57 loans per loan officer in 2007, compared to 62 loans per loan officer in 2006.

• Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest rate paid on a warehouse line of credit, dropped to $175 per loan, from $245 per loan in 2006, due to higher interest expense on warehouse lines.

• Net marketing income, which includes the gain or loss on the sale of loans in the secondary market, pricing subsidies and overages, as well as capitalized servicing and servicing released premiums, averaged $1,920 per loan in 2007 from $2,180 per loan in 2006.

• Servicing financial profits per loan rebounded to $109 per loan in 2007 primarily because of higher per-loan servicing fees (driven by higher loan balances) and lower net losses associated with mortgage servicing rights and hedging.

• Servicer productivity, measured as the number of loans serviced per servicing employee, rose to 1,398 loans serviced per servicing employee in 2007, most likely resulting from increased use of outsourcing.

• The smaller servicers continued to struggle operationally, with direct costs to service that averaged over three times higher than the largest servicers.

The data for this report was primarily derived from the Mortgage Bankers Financial Reporting Form (or "WebMB"), a multi-agency reporting form administered by MBA, Fannie Mae, Freddie Mac and Ginnie Mae.

If you not a member of the media and would like to purchase the report, please call (800) 348-8653 or (202) 557-2830.  The report can also be purchased on MBA’s website .

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.