According to the Mortgage Bankers Association's newly released Quarterly Mortgage Bankers Performance Report, independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $624 on each loan they originated in the third quarter of 2022, down from a reported loss of $82 per loan in the second quarter of 2022.
"The average pre-tax net production income per loan reached its lowest level since the inception of MBA's report in 2008, which is sobering news given that the third quarter is historically the strongest quarter of the year," said Marina Walsh, CMB, MBA's Vice President of Industry Analysis. "The industry continues to struggle with a perfect storm of lower production volume and revenues and escalating production costs, which for the first time exceed $11,000 per loan."
Added Walsh, "Companies are responding to tough market conditions by reducing excess capacity, including staff. The number of production employees per firm is down 7 percent from the previous quarter and 19 percent from one year ago. However, overall volume has dropped so swiftly that some companies are having difficulties adjusting staffing and other costs to match market conditions."
Walsh noted that mortgage servicing continues to be the silver lining in the current rate environment. With prepayments and delinquencies low, mortgage servicing has been the difference for many companies between profitable or not. Roughly one in two companies generated a profit in the third quarter; but without mortgage servicing operations, only one in four companies would have been profitable.
Walsh concluded, "October's report on slower inflation and the subsequent drop in mortgage rates could resuscitate purchase demand and ultimately provide some needed relief for the industry."
Key MBA findings include: