The Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report shows that independent mortgage banks and mortgage subsidiaries of chartered banks lost an average of $301 on each loan they originated in 2022, down from 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], with losses averaging 13 basis points. 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,” says MBA’s Marina Walsh. “The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues and higher costs per loan.”
Walsh notes that production revenues declined, but the main culprit in the overall losses was production expenses, which jumped to a study high of $10,624 per loan.
“Companies could not adjust their capacity fast enough,” Walsh adds. “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.”
On the servicing side, net financial income more than doubled in 2022. Higher loan balances pushed per-loan servicing fees higher. Servicing expenses dropped as serious delinquencies fell. Moreover, valuation mark-ups on mortgage servicing rights and slower prepayment activity contributed to servicing profitability.
However, the gains on the servicing side of the business were not enough to offset the substantial production losses. Including both servicing and production operations combined, only 32% of companies were profitable in 2022, down from 98% just two years prior.
Key findings of the report include the following:
- Average production volume was $2.6 billion (8,371 loans) per company in 2022, down from $4.9 billion (16,590 loans) per company in 2021. On a repeater company basis, average production volume was $2.8 billion (8,848) in 2022, down from $5 billion (17,069 loans) in 2021.
- In basis points, the average production loss was 13 basis points in 2022, down from a profit of 82 basis points in 2021. Since the inception of MBA’s Annual Performance Report in 2008, net production income by year has averaged 55 basis points ($1,261 per loan).
- The refinancing share of total originations (by dollar volume) decreased to 20% in 2022 from 46% in 2021. For the entire mortgage industry, MBA estimates the refinancing share last year decreased to 30% from 57% in 2021.
- The average loan balance for first mortgages reached a study-high of $323,780 in 2022, up from $298,324 in 2022. This is the largest single-year increase in the history of the report.
- Total production revenues (fee income, net secondary marking income and warehouse spread) were 333 basis points in 2022, down from 382 basis points in 2021. On a per-loan basis, production revenues were $10,322 per loan in 2022, down from $11,003 per loan in 2021.
- Total loan production expenses – commissions, compensation, occupancy, equipment and other production expenses and corporate allocations – increased to $10,624 per loan in 2022, up from $8,664 in 2021.
- Productivity was 1.5 loans originated per production employee per month in 2022, down from 2.5 in 2021. Production employees include sales, fulfillment, and production support functions.
- Net servicing financial income, which includes net servicing operational income, as well as mortgage servicing right (MSR) amortization and gains and losses on MSR valuations, was at a gain of $586 per loan in 2022, up from a gain of $261 per loan in 2021.
- Including all business lines, 53% of the firms in the study posted pre-tax net financial profits in 2022, down from 96% in 2021.
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