IMB Profits Fell In 2021, Layoffs Loom Heading Into 2022

After a record-breaking year for independent mortgage banks, profits declined by 75 basis points in 2021, according to the Mortgage Bankers Association’s (MBA) Annual Mortgage Bankers Performance Report.

Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $2,339 on each loan they originated in 2021, down from the record $4,202 per loan in 2020.

Average production volume totaled $4.9 billion per company, up from $4.5 billion in 2020.

But production expenses took a toll on profits, reaching their highest level since 2008, the first year of MBA’s report. Personnel expenses for sales, fulfillment, and production support all rose while revenues fell.

“2021 was another stellar year for independent mortgage bankers, with production profits well above average but down 75 basis points from the record-setting 2020,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. 

“Performance in the second half of 2021 declined relative to the first half of the year, which is an indication of where market conditions are heading in 2022 in an environment of high expenses, rising mortgage rates, and lower refinance originations.”

Refinances fell from 50% of total originations by dollar volume in 2020 to 46% in 2021. But 96% of companies stayed profitable in 2022 as companies moved from servicing financial losses in 2020 to servicing gains in 2021.

How 2022 will compare is yet to be seen, but many mortgage companies are already feeling the pressure of dwindling refis and buyer sticker shock. Companies that hired brokers at a breakneck pace last year are finding they can’t shuffle everyone to different departments as business slows.

“With rates moving higher, capacity is going to be adjusted across the entire industry,”  Jeff DerGurahian, chief capital markets officer at LoanDepot Inc., told Bloomberg.

Homepoint Capital has laid off 10% of its lenders. PennyMac Financial is laying off 236 employees in five California cities. The infamous has laid off more than 4,000 and is asking others to leave voluntarily.

“After a truly phenomenal ride for mortgage companies, more difficult times are expected in 2022 and possibly beyond,” Walsh said.

“Staying profitable will require prudent cost management, as well as more reliance on servicing operations to serve as a hedge against production declines.”