Lenders are still losing money on each home loan

Mortgage lenders again lost money on each loan originated in the first quarter of the year, after recording record losses in the last quarter of 2022, according to data from the Mortgage Bankers Association (MBA). 

Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net loss of $1,972 on each loan, the data showed. Reported losses in the fourth quarter reached more than $2,800 per loan. 

Data covering all of 2022 showed banks and mortgage companies lost an average of $301 for each loan they originated that year, down from an average profit of $2,339 per loan in 2021. 

According to a statement from Marina Walsh, the MBA’s vice president of industry analysis, consecutive quarters of losses mean industry conditions remain challenging, despite the quarterly improvement.

“One silver lining from the first quarter is that production revenues improved by 40 basis points,” Walsh said. 

“However, costs continued to escalate with the further drop in volume and reached more than $13,000 per loan despite substantial personnel reductions,” she added. 

The average number of production employees per company declined from 413 in the previous quarter to 374 this quarter. 

Mortgage rates rose rapidly in the second half of 2022 while the Federal Reserve raised its interest rate in an effort to cool inflation. The 30-year fixed rate cleared 7 percent in November, making homes even more unaffordable for many amid already high purchase prices and significantly cooled the market.  

The benchmark rate has since settled from its high mark but is still hovering well above 6 percent, reaching 6.39 percent this week.  

“After the substantial slowdown in growth last fall, home prices stabilized during the winter and began to modestly rise over the last few months,” Freddie Mac Chief Economist Sam Khater said in a statement. 

“This indicates that while affordability remains a hurdle, homebuyers are getting used to current rates and continue to pursue homeownership,” he added.  

Yet mortgage costs keep rising for first-time homebuyers, the MBA’s data showed, with the average loan balance for first mortgages increasing to $329,159 from $322,225 in the fourth quarter.