Mortgage lenders lost an average of $1,056 on each loan they originated in 2023, compared to an average loss of $301 per loan in 2022, according to the Mortgage Bankers Association’s (MBA) Annual Performance Report.
Average annual production volume was $1.9 billion (6,021 loans) per company, down from $2.6 billion (8,371 loans) per company in 2022.
On a repeater company basis, average production volume was $2 billion (6,436 loans), down from $2.7 billion (8,605 loans) from 2022.
The 37-basis-point annual loss in 2023 was significantly worse compared with the 13-basis-point loss the year prior.
Since the inception of MBA’s Annual Performance Report in 2008, net production income by year has averaged 49 basis points ($1,117 per loan).
“Mortgage lender financial results worsened in 2023 with the average net production loss moving to 37 basis points from losses of 13 basis points in 2022,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “And although production revenues stabilized, costs escalated to a study high $11,258 per loan. Mortgage market conditions were challenging last year because of higher mortgage rates, low housing inventory, and weaker housing affordability. These factors resulted in a further decline in volume, compounding the precipitous drop in 2022. Many companies were still chasing cost containment and personnel reduction throughout the year.”
The average cost to produce a mortgage – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to $11,258 per loan in 2023, up from $10,624 in 2022.
“Some companies were able to weather the storm through cash reserves built up in the second half of 2019 through 2021,” Walsh adds. “Companies also benefited from mortgage servicing cash flows that remained strong in an environment of low delinquencies and low prepayments. However, most of the valuation mark-ups on mortgage servicing rights were taken in 2022, resulting in lower net servicing financial income in 2023.”
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 $263 per loan in 2023, down from a gain of $586 per loan in 2022.
Photo: Majestic Lukas