Why US mortgage lenders lost money on home loans for the first time on record

The US housing market tightened so badly last year that mortgage lenders started taking losses on home loans, according to industry data.

Last year, banks and mortgage lending firms lost an average of $301 on each home loan, according to the Mortgage Bankers Association. Annual Performance Report released last week,

The loss was the first of its kind recorded by MBA since tracking loan generation income in 2008.

The average $301 loss marked a major decline from the previous leader, when mortgage lenders reported an average profit of $2,339 per home during a record boom in US housing demand.

According to MBA Vice President of Industry Analysis Marina Walsh, mortgage lenders were hit by a rise in loan rates, which caused demand for purchase and refinance applications to drop to their lowest levels in decades.

“A confluence of declining volume, lower revenue and higher cost per loan resulted in the elimination of the stellar gains of the past two years,” Walsh said in a statement.

Companies were unable to reduce their expenses fast enough to compensate for the large drop in demand.

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Rising mortgage rates crushed application demand last year.
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“Companies couldn’t adjust their capacity fast enough,” Walsh said. “The number of production workers declined, but not at the same pace as the volume of originations. As a result, productivity fell to a low of 1.5 closed loans per month per production worker in 2022.

Mortgage demand hits 25-year low Last October, 30-year fixed loan rates topped 7%, leaving many potential buyers and sellers on edge.

Rates have cooled slightly since then, though they are still hovering above 6%.

According to MBA analysis, 32% of companies operating in the mortgage lending sector were profitable last year.

That was down from the 98% who made gains during a pandemic-era housing boom two years ago.

The drop in application volume squeezed lenders’ bottom lines.
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Mortgage lending costs rose to $10,624 per loan last year, outpacing gains in debt servicing.

America The downturn in the housing market has prompted waves of layoffs. and restructuring in the entire real estate sector.

In January, Wells Fargo, a bank that once dominated the mortgage-lending sector, revealed that it will back your mortgage business Because the situation worsens in the market.

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The US housing market is in the midst of a major correction.
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In another shakeup, HomePoint, one of the largest mortgage lenders in the US last year, revealed last week that it would sell its properties to The Loan Store.

“After careful consideration, and in light of current market conditions, we have decided to sell our wholesale origination business to The Loan Store,” said Willie Neumann, President and CEO of HomePoint. “We believe this is the best decision for our company to continue providing value to Home Point shareholders.”

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