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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 58 J O U R N A L May 2023 Lending/Originations LOAN ORIGINATIONS BY INDEPENDENT BANKS BREACH NEGATIVE PROFIT TERRITORY A ccording to the Mortgage Bankers Association's (MBA) annual Mort- gage Bankers Performance Report, independent mortgage banks and subsidiar- ies of chartered banks lost an average of $301 on every loan they originated in 2022, down from an average profit of $2,339 per loan in 2021. "For the first time since the inception of MBA's report in 2008, net production income was in the red in 2022, with losses averaging 13 basis points. 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 VP 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." Walsh continued, "Production revenues declined in 2022, but the bigger story was that production expenses ballooned to a study high of $10,624 per loan. Companies could not adjust their capacity fast enough. The number of production employees declined, but not at the same pace as origination vol- ume. As a result, productivity in 2022 fell to a low of 1.5 closed loans a month per produc- tion employee." According to the MBA, on the servicing side of the business, net financial income more than doubled in 2022. Higher loan bal- ances pushed per-loan servicing fees higher. Servicing expenses dropped as serious delinquencies fell. Moreover, valuation mark- ups on mortgage servicing rights and slower prepayment activity contributed to servicing profitability. The gains on the servicing side of the business were not enough to offset the substantial production losses. Including both servicing and production operations com- bined, only 32% of companies were profitable in 2022, down from 98% just two years prior. Walsh concluded, "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." Key findings of MBA's 2022 Annual Mort- gage Bankers Performance Report include: » Average production volume was $2.6 billion (8,371 loans) per company in 2022, down from $4.9 billion (16,590 loans) per company in 2021. On a repeater company basis, average production volume was $2.8 billion (8,848) in 2022, down from $5 billion (17,069 loans) in 2021. » In basis points, the average production loss was 13 basis points in 2022, down from a profit of 82 basis points in 2021. Since the inception of MBA's Annual Performance Report in 2008, net produc- tion income by year has averaged 55 basis points ($1,261 per loan). » The refinancing share of total origina- tions (by dollar volume) decreased to 20% in 2022 from 46% in 2021. For the entire mortgage industry, MBA estimates the refinancing share last year decreased to 30% from 57% in 2021. » The average loan balance for first mort- gages reached a study-high of $323,780 in 2022, up from $298,324 in 2022. This is the largest single-year increase in the history