MBA cautions lenders of falling productivity, pull-through

The Mortgage Bankers Association is warning lenders of wavering productivity and stubbornly high expenses amid what should be steadily climbing production volume.

The trade group's top economists Sunday at the MBA Annual conference in Las Vegas discussed the macroeconomic headwinds that they suggested shouldn't dramatically affect new mortgage volume. The economists are anticipating an 8% increase in both origination dollars and units next year. 

There will be growth, however weak, said Mike Fratantoni, the MBA's chief economist and senior vice president of research and business development. While the trade group doesn't foresee dramatic interest rate declines, growing inventory should help prohibitive home prices come down and drive activity. 

More concerning is the finding that productivity is lower than it was in 2018, said Marina Walsh, the MBA's vice president of industry analysis, research and economics. While the dollar amount is similar between now and then, the loan count is substantially different. 

"It's not that workers have become more inefficient," said Walsh. "There's a lot of work that is being done, and it's not resulting in a closed loan, for whatever reason." She pointed to borrowers applying with multiple lenders and walking away, leaving originators with time and resources sunk into deals that never close.  

Depositories pulled through just 55% of mortgage applications in the first half of 2025, while nonbanks closed 69%, both figures in decline since 2022. 

"So something with technology, some way, it would be very nice to put the brakes on those applications that are not going to close and not incur those costs," added Walsh. 

The industry recently recorded its best production profits since late 2021, although loans still cost over $11,000 to produce. Besides heavy fulfillment and sales expenses, large banks are also burdened with heavy corporate costs, Walsh said. The economist added that the MBA has heard of firms not adjusting large allocations stemming from the busy 2020 and 2021 period. 

Expenses include headcounts that have stabilized at an average of 315 employees per company in the second quarter. Fratantoni said the impact of artificial intelligence hasn't yet shown up in larger economic productivity data. 

How the MBA sees macroeconomic concerns

Beyond larger financial data suggesting slower gross domestic product growth in 2026, and a larger effective tariff rate this year, Fratantoni warned of America's declining population. The Congressional Budget Office has targeted 2031 when there will be more deaths than births; and immigration could be net negative this year. 

"We're making 30-year loans, and we're building houses that are going to last a number of decades, right?" said Fratantoni. "And so slower population growth, or maybe even at some point population decline, is going to have an impact on real estate markets. We should probably start thinking about that."

While delinquencies are rising on credit card, auto loan and student loan debt, late mortgage payments aren't as prevalent. Federal Housing Administration-backed loan delinquencies have been as high as levels in 2013, however, and non-qualified mortgage late payments are ticking up, said Joel Kan, MBA vice president and deputy chief economist. 

Homeowner headwinds and tailwinds

Rising taxes and insurance still weigh on homeowners, and the median monthly mortgage payment is just under $2,100. That cost is down from a peak from April 2024, as rates' steady decline have eased homeowners' burdens. While homeowners nationwide owe $14.5 trillion, they tout $35.8 trillion in equity, according to data from the Federal Reserve. 

The MBA also identified a rising market for adjustable-rate mortgages. Today 5-year and 7-year ARMs have rates around 80 basis points to 100 basis points lower than conventional 30-year FRMs. 

"We're also seeing more refinancing into ARMs," said Kan. "And it just came out from a few other meetings, where people were noting this too — borrowers [are] moving from a fixed-rate loan into an adjustable rate."