Independent mortgage banks (IMBs) and the mortgage divisions of chartered banks reported an average pre-tax net loss of $40 per loan in the fourth quarter of 2024, a sharp reversal from the $701 per-loan profit recorded in the previous quarter, according to new data from the Mortgage Bankers Association (MBA) IMBs Report.
The decline marked the ninth quarter of net production losses in the past three years, though the losses remained less severe than those seen in late 2022 and 2023.
“Net production losses resumed in the fourth quarter of 2024 after two consecutive quarters of modest gains,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “This decrease marks the ninth quarter of net production losses in the past three years, albeit a much smaller loss compared to the fourth quarters of 2022 and 2023.”
According to the report, mortgage production revenues and loan volumes remained relatively stable from the third to the fourth quarter, but average production expenses rose. The increased costs were partially attributed to a rise in mortgage applications in the third quarter, which translated into higher expenses in the fourth quarter.
“With the slowing in prepayments in the fourth quarter, net servicing financial income improved and helped the bottom line. Across both production and servicing operations, 61 percent of mortgage companies in MBA’s sample were profitable, compared to 71 percent in the previous quarter,” added Walsh.
Lenders with higher loan volumes were better able to manage expenses and, on average, still turned a profit. Smaller lenders, by contrast, struggled to break even.
The report also noted an improvement in net servicing financial income, aided by a slowdown in loan prepayments. This improvement helped offset some of the losses on the production side, though overall industry profitability declined. The percentage of mortgage companies reporting a pre-tax net financial profit fell to 61% in the fourth quarter from 71% in the previous quarter.
Key Findings:
Production Losses: Mortgage lenders reported an average pre-tax production loss of 4 basis points (bps) in the fourth quarter, down from an 18-bps profit in the third quarter.
Loan Volume: The average production volume per company stood at $540 million, with 1,609 loans per lender, slightly lower than the previous quarter.
Revenue and Costs: Total production revenue declined slightly to 339 bps, while production expenses rose to 344 bps, increasing per-loan costs to $11,230.
Loan Balances: The average balance for first mortgages increased to $363,795.
Servicing Income: Net servicing financial income rose to $142 per loan, reversing a loss of $25 per loan in the prior quarter.
