Despite originating $1.3 trillion worth of home loans last year, mortgage industry profits took a nose dive last year. Even a significant 50 percent improvement in earnings from administering the loans lenders write failed to stem the tide.

According to figures from the Mortgage Bankers Association, profitability industry-wide fell from 33.6 percent to 18.9 percent in 1999. The decline is attributable to a fall-off in loan production during the second half of the year.

Overall, return on equity from production operations slumped from 78.9 percent in 1998 to 52 percent last year, as overall origination volume tumbled from $1.5 trillion on 11.8 million to $1.3 trillion on 9.7 million mortgages.

At the same time, though, returns from the "servicing" side of the business collecting and distributing payments to investors and collecting and paying taxes and insurance for borrowers increased from 8.1 percent to 12 percent, the MBA said.

The MBA's current forecast is for a volume of $962 billion this year. For the first two quarters, originations totaled $545 billion.

Published: August 4, 2000

Use of this article without permission is a violation of federal copyright laws.