The Great Mortgage Reversal: Banks Losing Money for the First Time Ever

A surprising twist has emerged in a housing market marked by historically high prices and dwindling inventory. For the first time ever, banks and other mortgage providers are losing money on each mortgage they finance. 

According to a recent Mortgage Bankers Association (MBA) report, certain banks experienced an average loss of $301 per loan in 2022 ¹, a drastic reversal from the average profit of $2,339 per loan just a year prior.

The Tipping Point

The housing market reached a tipping point in 2022, with a confluence of factors conspiring to erode the profits of mortgage providers. As mortgage rates soared to near 20-year highs, prospective homebuyers became increasingly hesitant to enter the market. 

At the same time, a limited supply of available homes for sale kept prices elevated, further contributing to the affordability crisis.

Marina Walsh, Vice President of Industry Analysis for MBA, explained the impact of these converging forces on mortgage providers: “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. The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan.”

Blink, and You’Ll Miss the Profits

The dramatic decline in mortgage volume had far-reaching consequences for banks and mortgage companies. On average, these institutions financed a mere $2.6 billion in loans in 2022, starkly contrasting the $5 billion they financed in 2021. 

Compounding the issue, the cost of financing each loan rose by 23%, reaching an average of $10,624 per loan in 2022.

This cost increase can be attributed to a lag in the mortgage industry’s workforce reduction. As loan volumes declined, the number of employees in production roles also fell, but not at a pace sufficient to offset the drop in business. 

This mismatch resulted in a significant dip in productivity, with the average number of loans originated per production employee per month falling to 1.5 in 2022, down from 2.5 in 2021.

The Big Rebound? What This Means For Housing Prices

As the housing market continues to grapple with the affordability crisis, experts are split on the prospects for a correction. 

Some predict a significant downturn, with one MBA board member suggesting that home prices could fall by 9% this year ². Others foresee a milder correction, with a National Association of Realtors economist positing that home prices may have already reached their nadir and that a rebound is on the horizon.

For the moment, the only certainty in this unpredictable market is that banks and mortgage providers are feeling the pinch. But, as the industry navigates these unprecedented challenges, the question remains: will the housing market find its footing once more, or will the decline in affordability continue to weigh heavily on the sector? 

Only time will tell if the tipping point has been reached and if a recovery is within sight.


1: IMB Production Profits Fall to Series Low in 2022. (n.d.). MBA.

2: Housing is so unaffordable that banks are losing money for each mortgage they finance for the first time ever. (n.d.). Markets Insider.

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Davin is a jack-of-all-trades but has professional training and experience in various home and garden subjects. He leans on other experts when needed and edits and fact-checks all articles.