US Banks Losing Money on Mortgages in Historic Housing Shock: Report
How can they be losing money?
MBA press release: IMB Production Profits Fall to Series Low in 2022. the actual report requires a sub.
“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, CMB, MBA’s Vice President 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.”
Didn't we see this in the 1980s - and 1990s - depending on country? When the value of an outstanding mortgage is higher than the falling price of the property, owners are trapped into staying put, housing stock dwindles or buyers are having to pay larger monthly repayments for cheaper properties.
Sounds like a cash-buyer's market, again.
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 one thing crypto could do is to lower the costs of processing mortgages. However, such lending protocols will still need all the TradFi legal steps to manage the risks of defaults.
I don't see how they could be losing money either. But it isn't a buyer's market right now, cash or otherwise. Houses are still overpriced even without considering the currently high interest rates.
Here home prices have come down, but not far enough to offset the high mortgage rates. So, if the seller is still servicing a mortgage then they may be staring at a capital loss - exactly what I recall froze the market in the UK in 1980/90s.
Looks like their "losses" are largely theoretical, in that based on past projections. It also looks as if fees are too high - this is the USA, so not global - banks don't really like to repossess as that costs them money plus the loss of repayments. Not a sector that can squeeze out much sympathy from the public!