I was just reading an article from Market Insider and they say that lenders posted an average loss per mortgage last year. Can you folks enlighten me as to how that happens?
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There’s the really simple answer and the *really* complicated answer. It’s eli5 so we’ll go with the easy answer.
A combination of extremely high interest rates and extremely *low* construction of new residential units means that the number of new mortgages has dropped *extremely.* Prices of houses have gone way higher, costs of mortgage loans have increased substantially.
As a result, fewer people are buying new houses. Mortgage lenders make money when people pay interest on their mortgages. Fewer mortgages, less money coming in.
But the lenders are still businesses. They still have to make payroll, pay rent, manage their own debts. So they have costs. And because there’s so few mortgages being loaned out right now, the cost of being a mortgage lender has actually become, for many businesses, more expensive than the income they generate on interest payments.
If you make your money selling X and fewer people are buying X, then you can actually lose money.
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