US banks lost money on mortgages for first time on record

Banks in the United States did not have the best year with the housing market in 2022, as they lost money on mortgages last year.

On average, both independent mortgage banks and mortgage subsidiaries of chartered banks lost around $301 on every loan that originated last year, making it the first time lenders have lost money since the Mortgage Bankers Association started recording these statistics in 2008, according to a report from the MBA. The average $301 loss on every loan in 2022 is down from the average profit of $2,339 per loan from the year prior, according to USA Today.

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“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. “The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan.”

The loss in loans from last year came as mortgage rates more than doubled in 2022, though rates have decreased a bit since then. Loan volumes were also down by 50% last year, going from $4.9 billion, or 16,590 loans, per company in 2021 to $2.6 billion, or 8,371 loans, per company in 2022.

Beyond these losses, the cost of producing a loan also increased for lenders last year, going from $8,664 per loan in 2021 to $10,624 per loan in 2022.

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“Companies could not adjust their capacity fast enough,” Walsh said. “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 loss by banks from mortgages comes as more than half of millennials became homeowners last year. There were 18.2 million millennial homeowners across 260 U.S. metropolitan areas in 2022, compared to 17.2 million renters. The largest share of millennial homeowners was found in Midland, Texas, followed by Provo, Utah.