Non-bank Mortgage Companies Face Another Challenging Year Ahead as U.S. Housing Market Recalibrates

This commentary discusses the headwinds impacting non-bank mortgage companies for 2023.

Key highlights include:

• After a challenging origination market in 2022, the outlook for non-bank mortgage lenders is expected to remain challenging as the U.S. housing market recalibrates to weakening housing and economic fundamentals.

• Mortgage origination volume is expected to drop by 57% in 2023 compared to 2021 levels, primarily driven by the collapse of the highly interest rate sensitive refinancing market, which is expected to be down 81% compared to 2021.

• The non-bank mortgage companies followed by DBRS Morningstar reported a 30% - 75% decline in mortgage origination volume as well as materially lower gain on sale margins through 9M22, leading to lower earnings.

“DBRS Morningstar expects the operating environment for U.S. non-bank mortgage companies to remain challenging in 2023 as the U.S. housing market continues to recalibrate to higher mortgage rates, housing affordability issues, and ongoing uncertainty around the health of the U.S. economy,” said Shaima Ahmadi, Assistant Vice President, U.S. Non-Bank FIG.