Mortgage lenders took a loss of about $40 on each loan they originated in the fourth quarter – down from a net gain of $701 per loan in the third quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report.
“Net production losses resumed in the fourth quarter of 2024 after two consecutive quarters of modest gains,” says Marina Walsh, CMB, vice president of industry analysis for the MBA, in a statement. “This decrease marks the ninth quarter of net production losses in the past three years, albeit a much smaller loss compared to the fourth quarters of 2022 and 2023.”
According to Walsh, fourth-quarter production revenues and volume were relatively flat compared to the third quarter, while average production expenses increased.
Expenses related to the uptick of applications in the third quarter were likely recognized in the fourth quarter.
Additionally, while per-loan expenses increased across lenders of all sizes, lenders with larger volume benefitted from scale, as fixed costs were spread over more volume, and they were able to generate an average production profit in the fourth quarter. Meanwhile, lenders with lower production volume struggled to break even.
“With the slowing in prepayments in the fourth quarter, net servicing financial income improved and helped the bottom line,” Walsh says. “Across both production and servicing operations, 61 percent of mortgage companies in MBA’s sample were profitable, compared to 71 percent in the previous quarter.”
The average pre-tax production loss was 4 basis points (bps) in the fourth quarter, down from the reported profit of 18 bps in the third quarter, but less than the loss of 73 basis points one year ago.
The average quarterly pre-tax production profit, from the fourth quarter of 2008 to the most recent quarter, is 41 basis points.
Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to 344 basis points in the fourth quarter, up from 323 basis points in the third quarter of 2024.
Per-loan costs increased to $11,230, up from $10,716 per loan in the third quarter.
Servicing net financial income for the fourth quarter (without annualizing) was $142 per loan, up from a loss of $25 per loan in the third quarter.
Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $84 per loan in the fourth quarter, down from $93 per loan in the third quarter.
Including all business lines (both production and servicing), 61% of the firms in the report posted pre-tax net financial profits in the fourth quarter, down from 71% in the third quarter of 2024.
Photo: Pepi Stojanovski