Mortgage bankers post a record annual loss on originations

Driven by a record three-month loss in the fourth quarter, independent mortgage bankers last year had their worst year ever in terms of per loan results, their industry association said.

These lenders, along with bank mortgage subsidiaries, lost an average of $1,056 on each loan they originated in 2023, compared with an average loss of $301 per loan the prior year.

In all four quarters last year, IMBs lost money on their production, including a $2,109 per loss during the last fiscal period of the year.

Expenses rose to $11,258 per loan, which is also the most since the MBA started its study 15 years ago. For 2022, expenses averaged $10,624 per loan.

On average, lenders lost 37 basis points per loan in 2023 compared to 13 basis points in 2022.

"Mortgage market conditions were challenging last year because of higher mortgage rates, low housing inventory, and weaker housing affordability," Marina Walsh, the MBA's vice president of industry analysis, said in a press release. "These factors resulted in a further decline in volume, compounding the precipitous drop in 2022."

Many firms pursued cost-containment strategies during the year, including personnel reductions, to try to counter this.

"Some companies were able to weather the storm through cash reserves built up in the second half of 2019 through 2021," Walsh continued. "Companies also benefited from mortgage servicing cash flows that remained strong in an environment of low delinquencies and low prepayments."

However, mortgage servicing rights valuation markups taken during 2022 ended up hurting sector income last year.

Net servicing financial income — made up of operational income, MSR amortization, plus gains and losses on MSR valuations — was $263 per loan in 2023, down from $586 per loan in 2022.

Since the report started in 2008, annual net production-income by year has averaged 49 basis points or $1,117 per loan.

Inclusive of all segments, 36% of the companies that participated in the MBA's study posted pre-tax net financial profits in 2023, down from 53% in 2022.