Bank coffers swelling with Profits from Mortgage Sales

Independent mortgage bankers and the home-loan arms of major banks are making the highest profit in years on loans they make and then sell, thanks to low interest rates.

But the rates could be still lower if lenders cut their profit margins, according to data released Friday by the Mortgage Bankers Assn.

Instead, bankers have been making extra money by keeping the rates higher than necessary, which makes them more profitable when they are sold to Fannie Mae, Freddie Mac or other secondary markets, the Mortgage Bankers Assn. figures show.

The lenders made an average profit of $1,654 on each loan they originated in the first quarter of 2012, up 51% from $1,093 per loan a year earlier.

One factor in the bonanza is big banks charging higher than market rates when they refinance their customers using the government’s Home Affordable Refinance Program. HARP lowers the risks for banks despite the fact that the borrowers owe more than their homes are worth.

More in article by E. Scott Reckard, at latimes.com:  http://dld.bz/b7qVX