Banks Profit on Obama Mortgage Plan

Bank mortgage profits surged remarkably once the Obama administration's housing plan was implemented, according to a report on Thursday .
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NEW YORK (

TheStreet

) -- Bank mortgage profits surged remarkably once the Obama administration's

housing plan was implemented, according to a report on Thursday that put some hard numbers behind what was already widely known.

Each new mortgage loan generated $1,088 in profit during the first quarter, according to the Mortgage Bankers Association, about 7.4 times as those originated in the previous period. The main driver for the climb was the federal plan unveiled late in the first quarter, on Feb. 18, which aimed to allow homeowners to refinance into less costly mortgages and spur new buyers into the market. Mortgage profits likely

improved even more during the second quarter, since the plan was more widely available and banks had hired more staff to handle the surge in consumer demand.

"It is clear the refinance boom in the first quarter of 2009 contributed greatly to an increase in overall production volumes, allowing production operating expenses per loan to finally drop," said Marina Walsh, who oversees industry analysis at the MBA.

The net cost for a bank to originate a mortgage dropped by 26% to $1,725 per loan, according to the MBA survey. Operating costs fell as well. The lower costs combined with a surge in production volumes resulted in 85% of the firms surveyed reporting pre-tax profits, vs. 53% in the fourth quarter of 2008.

The huge margin expansion was evident in the results of

Bank of America

(BAC) - Get Report

,

Wells Fargo

(WFC) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

and

Citigroup

(C) - Get Report

, whose results have all improved sharply in the past two quarters.

-- Written by Lauren Tara LaCapra in New York

.