Mortgage Banks Face Significant Profit Drop in 2022 Due to Multiple Factors
According to the Mortgage Bankers Association's (MBA) Annual Mortgage Bankers Performance Report, mortgage banks and subsidiaries of chartered banks experienced a significant drop in profits in 2022.
On average, they lost $301 per loan originated, compared to earning $2,339 per loan in 2021.
The decline in profits was due to multiple factors, including the sudden increase in mortgage rates, a shortage of affordable housing inventory, and affordability challenges.
These issues led to a decrease in purchasing and refinance volume, causing a decline in productivity to a low of 1.5 closed monthly loans per production employee. Production expenses also increased to a record high of $10,624 per loan in 2022.
In contrast, the servicing side of the business saw an increase in net financial income as servicing fees rose with higher loan balances, and expenses dropped due to a fall in serious delinquencies.
The profits gained on the servicing side of the business were insufficient to counter the considerable losses incurred on the production side.
This led to a decline in profitability, with only 32% of companies being profitable in 2022, down from 98% in the previous two years.
The MBA predicts that the mortgage volume will continue to decline in 2023 before picking up again in 2024 and 2025.