IMBs Lost Money On Every Origination In 2022

For the first time since at least 2008, independent mortgage banks and mortgage subsidiaries of chartered banks lost money every time they originated a loan.

The Mortgage Bankers Association’s Annual Mortgage Bankers Performance Report found that IMBs lost an average of $301 on each loan in 2022. This puts production profits down 15% YOY, a series low.

The decrease was driven by low loan origination volume coupled with skyrocketing expenses. Volume was down 20% YOY. At the same time, loan balances increased by 5%, the largest single-year increase in the data’s history, resulting in higher production costs.

“The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis.
“Production revenues declined in 2022, but the bigger story was that production expenses ballooned to a study high of $10,624 per loan. Companies could not adjust their capacity fast enough. The number of production employees declined, but not at the same pace as origination volume. As a result, productivity in 2022 fell to a low of 1.5 closed loans a month per production employee.”

MBA predicts that the market will rebound in the next few years, leading to an increase in originations.

Until then, lenders are in for a bumpy ride. Overall mortgage origination volume fell by 10% in 2022, reflecting a slower housing market.

Both buyers and sellers are nervous about the market, facing economic pressures in both their daily lives and their homebuying journeys. National new listings fell 21.8% YOY during the four weeks ending April 2, one of the largest dips since the beginning of the pandemic.

“Elevated mortgage rates are perhaps an even bigger deterrent for would-be sellers than for would-be buyers. Giving up a 3% mortgage rate for one in the 6% range is a tough pill to swallow,” Redfin Deputy Chief Economist Taylor Marr said.

Mortgage rates have trended lower in the wake of recent banking uncertainty, but are still nearly 2% higher than at the same time last year.

While conventional loans remained the most popular type of loan, FHA loans saw a significant increase in volume, growing by 15% year-over-year. MBA attributes this to the increasing difficulty for first-time homebuyers to qualify for conventional loans due to rising home prices.

“There is no denying the very difficult circumstances in which mortgage companies are still operating today,” Walsh said.

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