According to the recently released Quarterly Mortgage Bankers Performance Report by the Mortgage Bankers Association (MBA), independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $40 on each loan they originated in Q4 of 2024. This is a decrease from the reported net profit of $701 per loan in Q3 of 2024.
“Net production losses resumed in the fourth quarter of 2024 after two consecutive quarters of modest gains,” said Marina Walsh, CMB, MBA’s VP 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.”
Key Findings of MBA’s Q4 2024 Quarterly Mortgage Bankers Performance Report include:
- In Q4 of 2024, the average pre-tax production loss was 4 basis points (bps), which was smaller than the 73 basis point loss in the previous year but still lower than the reported profit of 18 bps in Q3. From Q4 of 2008 to the most recent quarter, the average quarterly pre-tax production profit was 41 basis points.
- In Q4 of 2024, the average pre-tax production loss was 4 basis points (bps), which was smaller than the 73 basis point loss in the previous year but still lower than the reported profit of 18 bps in Q3. From Q4 of 2008 to the most recent quarter, the average quarterly pre-tax production profit was 41 basis points.
- Commissions, remuneration, occupancy, equipment, and other production costs and corporate allocations accounted for 344 basis points of the total loan production expenditures in Q4 2024, up from 323 basis points in Q3 2024. Costs per loan went from $10,716 per loan in Q3 of 2024 to $11,230 per loan in Q4. Loan production costs have averaged $7,628 per loan since Q4 of 2008.
- By dollar volume, 78% of all originations were purchases. According to the MBA, the purchase share for the entire mortgage market was 62% in Q4 2024.
- The average first mortgage loan balance rose from $361,518 in Q3 to $363,795 in Q4.
- Compared to Q3’s loss of $25 per loan, servicing net financial income for Q4 (without annualizing) was $142 per loan. Servicing operational income decreased from $93 per loan in Q3 to $84 per loan in Q4, excluding MSR amortization, gains/losses in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs.
- Compared to 71% in Q3 of 2024, only 61% of the companies in the report reported pre-tax net financial profits in Q4 of 2024, including all business lines (production and servicing).
“With the slowing in prepayments in the fourth quarter, net servicing financial income improved and helped the bottom line,” said Walsh. “Across both production and servicing operations, 61% of mortgage companies in MBA’s sample were profitable, compared to 71% in the previous quarter.”
Walsh suggests that while average production costs rose, fourth-quarter production revenues and volume were essentially unchanged from Q3 of 2024. Q4 most certainly saw the recognition of costs associated with the third-quarter increase in applications. Furthermore, lenders with higher volume benefited from scale, as fixed costs were distributed over a greater volume, and they were able to produce an average production profit in Q4, even though per-loan costs rose for lenders of all sizes. Lenders with smaller production volumes, meanwhile, found it difficult to break even.
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