Elevated costs, low volume lead to worst year on record for independent lenders

Average per-company loss in 2023 is largest ever recorded by MBA

Independent lenders just gutted their way through one of the toughest years they’ve ever had, as evidenced by the latest Annual Mortgage Bankers Performance Report from the Mortgage Bankers Association (MBA).

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks lost an average of $1,056 on each loan originated in 2023, according to the report. That’s down from a average loss of $301 per loan one year prior. The average loss in 2023 is the largest ever recorded since the MBA began tracking production losses for independent lenders 15 years ago.

 “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. And although production revenues stabilized, costs escalated to a study high $11,258 per loan,” said Marina Walsh, CMB, vice president of industry analysis at the MBA.

Those total loan costs, which include commissions, compensation, equipment, and other production expenses, were up from $10,624 per loan one year prior. Production revenues were essentially flat, coming in at 329 basis points in 2023, a small decrease from 333 basis points one year prior. Per loan, production revenues were at $10,202 per loan last year, down from $10,322 in 2022.

Per-loan difficulties were amplified by the stark decrease in volume most companies experienced in 2023. The average production volume last year for IMBs was $1.9 billion on 6,021 loans per company, a steep drop from $2.6 billion on 8,371 loans one year prior.

Additionally, high home prices led to an average loan balance for first mortgages of $331,437 in 2023, a new series high and up from $323,780 in 2022.

Taking all business lines into account, just 36% of the firms evaluated by the MBA posted pre-tax net profits, down from 53% in 2022.

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


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