Servicers Reap Operational Gains.(Financial report)

NEW YORK -- The industry's biggest servicers benefited from their scale in 2006, achieving the highest direct-servicing income while maintaining the lowest cost-to-service per loan, according to an annual cost study from the Mortgage Bankers Association.

But all was not rosy in the servicing sector, according to the study. Servicing financial profits per loan declined by 44% in 2006, largely because hedging losses were not fully offset by gains in the value of mortgage servicing rights.

The industry's per-loan servicing financial profit averaged $58 in 2006, down from $104 a year earlier.

Direct-servicing net income per loan exceeded $400 for the first time, when both income and expenses are taken into account. Lenders reported net income per loan of $406 in 2006, up from $381 in 2005. The largest participants in the survey - those managing more than 50,000 loans - reported the strongest gains.

Operationally, lenders reported receiving $489 per loan in direct income from servicing last year, the highest level in recent history. That was comprised of $436 per loan in servicing fees and $54 in ancillary income. Ancillary fee income was up 64% from 2005, and the MBA said the increase may reflect higher late-fee income on early delinquencies and greater use of "speed pay" options, for which consumers often pay a fee.

Direct expense totaled $83 per loan, up from $73 per loan one year earlier. The increase was largely driven by higher staffing ...