US banks lost money on mortgages in 2022, according to a report from the Mortgage Bankers Association (MBA), which noted that the average loss was $301 on each loan originated that year, vs. an average profit of $2,339 per loan in 2021.
“The rapid rise in mortgage rates over a relatively short period of time, combined with extremely low housing inventory and affordability challenges, meant that both purchase and refinance volume plummeted,” said Marina Walsh, MBA’s vice president of industry analysis, as reported by USA Today. “The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues and higher costs per loan.”
The MBA has been tracking these statistics since 2008.
Mortgage rates more than doubled in 2022, briefly touching 7% in October. Rates have since come down slightly.
Loan volumes in 2022 were 50% down compared with 2021. Volume was $2.6 billion (8,371 loans) per company in 2022, down from $4.9 billion (16,590 loans) per company in 2022.
Meanwhile, producing a loan got more expensive for lenders. The total costs including commissions, compensation and equipment increased to $10,624 per loan in 2022, up from $8,664 in 2021. -USA Today
“Companies could not adjust their capacity fast enough,” said Walsh. “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.”
The report also notes that refinancing applications were also down, as most homeowners have loans with interest rates below 4%. By dollar volume, the refinancing share of total originations dropped 20% in 2022 from 46% in 2021.
Meanwhile, the average loan balance for first mortgages reached a high of $323,780 in 2022, up from $298,324 in 2021 – the largest single-year increase in the history of the report.
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