In 2000, the weighted average return dropped to 15.8% from 19.1% in 1999. Overall profitability was down because of a dramatic dip in loan production volume during the first quarter of 2000, while the production end, which includes including warehousing and secondary marketing operations, showed a mild recovery during the second half of the year, but not enough to make up the difference.

Experts attributed the profit drop to a trend that started in 1998, which was a record year for the industry. To handle production then, companies added resources that were still in place the following years, when there was less production, says Marina Walsh, a financial analyst with the MBA.

"A lot of companies examined themselves and implemented new management techniques to keep costs down," she says. "As a consequence, if they have a better handle on costs, it should produce a favorable first half (this year)."