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THE LATEST ORIGINATION Costs and Profits Increasing for Originators A recent study from the MBA shows that rising costs in the industry aren't driving down profit margins as significantly as anticipated. C origination for these originators rose from $1,093 in the fourth quarter of last year to $1,654 in the first quarter of this year, ac- cording to the MBA. The net cost of originating a to a recent study of independent mortgage banks and mortgage subsidiaries of chartered banks conducted by the Mortgage Bankers Association (MBA). The average profit per loan osts are rising for mort- gage originators, but they are still seeing a rise in profit, according this year, leaping from $4,355 per loan in the fourth quarter of last year to $5,011 per loan in the first quarter of this year. The average production volume per company dropped during the first quarter, accord- ing to the MBA, falling from $313 million in the fourth quarter of 2011 to $301 million in the first quarter of this year. "Independent mortgage mortgage loan in the first quarter of this year was $3,413. When calculat- ing net cost, MBA weighs produc- tion and operating expenses and commissions against fee income, excluding factors such as secondary marketing gains, capitalized servic- ing, warehouse interest spread, and servicing released premiums. The net cost of origination per loan in the fourth quarter of last year was $3,324. Personnel costs also rose over the quarter from $3,226 in the fourth quarter of last year to $3,350 in the first quarter of this year. Secondary marketing income also rose in the first quarter of bankers remained focused on purchase production while many larger banking institutions were handling significantly more refinancing activity," said Marina Walsh, associate VP of industry analysis at the MBA. Refinances made up 58 percent of mortgage loan originations in the first quarter of this year, measured by dollar volume, ac- cording to the MBA. This is up one percentage point from the previous quarter. However, for the entire mortgage industry, including chartered banks, the MBA estimates refinances made up about 75 percent of loan originations in the first quarter of this year, down from 78 percent in the previous quarter. "Independent mortgage bankers remained focused on purchase production while many larger banking institutions were handling significantly more refinancing activity." — Marina Walsh, associate VP of industry analysis at the MBA 'Slight' Improvement McGraw-Hill alters its yearly outlook to reflect more growth than originally expected for home construction. H the McGraw-Hill Companies indicate a forecasted increase of 2 percent for the year. According to projections from the 2012 Dodge Construction Outlook Midyear Update, total construction starts will hit $445 billion, besting the $434 billion recorded during 2011. The outlook report, which ome construction starts are on the rise in 2012, and updates to a recent survey from study revealed that single-family housing is set to advance by 21 percent in dollars, with a cor- responding 19 percent increase in the number of units. Meanwhile, multifamily growth will reach 19 percent in dollars and 18 percent in units. For commercial building, 2012 Significant findings from the is compiled by McGraw-Hill Construction, calls the predicted performance "slightly better than" flat. Additionally, the company noted that current numbers still portray "an industry struggling to gain upward momentum." Robert A. Murray, VP of will bring about a 10 percent increase, which falls short of the 12 percent rise seen in 2011. The institutional sector will lose ground this year, dropping by 10 percent, following an 11 percent slide in 2011. Continuing his commentary, economic affairs for McGraw- Hill Construction, stated, "The construction industry has yet to move from a hesitant up-and- down pattern to more sustained expansion. After plunging 23 per- cent in 2009, new construction starts edged up only 1 percent in 2010 and were unchanged in 2011, so the modest 2 percent increase predicted for 2012 is really more of the same." Construction Starts Show Murray added, "The backdrop for the construction industry remains the fragile U.S. economy, which continues to see slow employment growth, diminished funding from federal and state governments, and the uncer- tainty related to the U.S. fiscal stalemate and the European debt crisis. On the plus side, energy costs are now receding, interest rates are very low, and lend- ing standards are beginning to ease for commercial real estate development." THE M REPORT | 41 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET