Summary
Mortgage loan servicing
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Extract
The 1988 servicing profit picture.
THE 1988 SERVICING PROFIT PICTURE
Profitability in mortgage lending in 1988 was little better than in 1987, as the industry continued its efforts to cope with difficult environmental conditions. Loan origination volume remained deeply depressed during 1988, and the costs of handling delinquent and foreclosed loans were once again exceptionally high. Rising short-term interest rates, which increased the costs of carrying mortgages in warehouse, added to the problems of maintaining profitability. For the 114 mortgage banking firms that provided detailed 1988 statistics on income and costs by mortgage banking function, the average pretax profit margin (net income per dollar of gross revenue) was 1.7 percent in 1988, barely above the meager 1987 level. Profit margins were increased to 14.3 percent by sales of servicing, but of course this entails a sacrifice of future income to bolster current profitability. (See Table 1) Table : Income and Expenses Per Firm (in Thousands) Average Fi...See the full content of this document
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