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Independent mortgage banks and mortgage subsidiaries of chartered banks lost an average of $301 on each loan they originated in 2022, according to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report. In comparison, these companies generated an average profit of $2,339 per loan in 2021.

“For the first time since the inception of MBA’s report in 2008, net production income was in the red in 2022, with losses averaging 13 basis points,” said Marina Walsh, MBA’s vice president of industry analysis. “The rapid rise in mortgage rates over a relatively short period of time, combined with extremely low housing inventory and affordability challenges, meant that both purchase and refinance volume plummeted. The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan.”

Walsh observed that while production revenues were down last year, “the bigger story was that production expenses ballooned to a study high of $10,624 per loan. Companies could not adjust their capacity fast enough. The number of production employees declined, but not at the same pace as origination volume. As a result, productivity in 2022 fell to a low of 1.5 closed loans a month per production employee.”

While this was taking place, the net financial income on the servicing side of the industry more than doubled in 2022 as higher loan balances pushed per-loan servicing fees higher. Servicing expenses dropped as serious delinquencies fell as valuation mark-ups on mortgage servicing rights and slower prepayment activity helped fuel servicing profitability.

Nonetheless, the servicing side of the business could not negate the production losses. MBA noted that when both servicing and production operations were combined for its data analysis, only 32% of companies were profitable in 2022, down from 98% two years earlier.

“There is no denying the very difficult circumstances in which mortgage companies are still operating today,” Walsh added. “MBA’s forecast calls for mortgage volume to decline again in 2023 before an expected rebound in 2024 and 2025.”