Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks lost an average of $1,056 on each loan they originated in 2023, down from an average loss of $301 per loan in 2022, according to data released Thursday by the Mortgage Bankers Association (MBA).

This was the largest loss recorded in the 15 years that MBA has tracked production data.

“Mortgage lender financial results worsened in 2023 with the average net production loss moving to 37 basis points from losses of 13 basis points in 2022. And although production revenues stabilized, costs escalated to a study high $11,258 per loan,” Marina Walsh, MBA’s vice president of industry analysis, said in a statement.

“Mortgage market conditions were challenging last year because of higher mortgage rates, low housing inventory, and weaker housing affordability. These factors resulted in a further decline in volume, compounding the precipitous drop in 2022. Many companies were still chasing cost containment and personnel reduction throughout the year.”

MBA’s Annual Mortgage Bankers Performance Report records a variety of measures on the mortgage banking industry and is intended as a financial and operational benchmark for IMBs.

On average, production volume was  $1.9 billion (6,021 loans) per company in 2023, down from $2.6 billion (8,371 loans) per company in 2022. Additionally, the refinancing share of total originations by dollar volume decreased to 11% in 2023, down from 20% in 2022. The average loan balance for first mortgages reached $331,437 in 2023, up from $323,780 in 2022.

“Some companies were able to weather the storm through cash reserves built up in the second half of 2019 through 2021,” Walsh added. “Companies also benefited from mortgage servicing cash flows that remained strong in an environment of low delinquencies and low prepayments. However, most of the valuation mark-ups on mortgage servicing rights were taken in 2022, resulting in lower net servicing financial income in 2023.”

Total production revenues — including fee income, net secondary marking income and warehouse spread — fell to 329 basis points in 2023, down from 333 basis points in 2022. Put another way, production revenues were $10,202 per loan in 2023, compared to $10,322 per loan in 2022.

Total loan production expenses (including commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) increased to $11,258 per loan in 2023, up from $10,624 in 2022.

Net servicing financial income also slumped during the past year. Net servicing operational income, as well as mortgage servicing right (MSR) amortization and gains and losses on MSR valuations, represented a gain of $263 per loan in 2023, down from a gain of $586 per loan in 2022.

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