US Banks Losing Money on Mortgages in Historic Housing Shock: Report

US banks are losing money on mortgages for the first time on record, according to a new research report from the Mortgage Banker’s Association (MBA).

The report, which dives into the latest stats from 2022, reveals a precipitous drop in revenue for financial institutions that issue real estate loans to businesses, investors and everyday Americans.

“Independent mortgage banks and mortgage subsidiaries of chartered banks lost an average of $301 on each loan they originated in 2022, down from an average profit of $2,339 per loan in 2021.”

This is the first time mortgage lenders have collectively been in the red since the MBA began tracking these stats back in 2008.

The report attributes the losses to surging mortgage rates in a relatively short amount of time, combined with “extremely low housing inventory and affordability challenges.”

In addition, the cost that mortgage lenders are paying to finance loans increased from $8,664 per loan in 2021 to $10,624 in 2022. The increase accounts for line items like commissions, compensation, occupancy, equipment and other production expenses.

Marina Walsh, MBA’s vice president of industry analysis, says the firm expects mortgage demand from buyers to further drop throughout 2023.

“There is no denying the very difficult circumstances in which mortgage companies are still operating today. MBA’s forecast calls for mortgage volume to decline again in 2023 before an expected rebound in 2024 and 2025.”

The Federal Reserve Bank of Dallas recently warned home prices could decline 19.5% this year to bring the cost of purchasing a property in line with the cost of rent.

The risk of declining home prices is so significant that Dallas Fed economists said the housing “bubble hypothesis” merits attention.

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