Chart of the Week: Retail Production Channel–Cost to Originate a Loan

This past spring, the MBA and STRATMOR Peer Group Roundtables Program (“PGR”) benchmarked lender performance across four major production channels and various peer groups based on production volume, institution type, and business model, such as builder affiliate and non-QM. Net production profits in 2025 generally improved from the previous two years, but there was variability amongst the six peer groups and amongst lenders within a given peer group in terms of revenues and expenses.

Based on this PGR dataset, this week’s Chart of the Week shows the major components of production costs in the retail channel for the two major institution types: depositories and independent mortgage companies (excluding builder affiliates).  For depositories, the cost to originate averaged $16,320 per loan in 2025, relatively flat compared to 2024 and a 4% improvement over this group’s study-high of $17,071 per loan in 2023.  The largest cost was sales expense, which accounted for 42% of overall costs. Corporate costs and production support allocations weighed heavily on many depositories, accounting for 38% of fully loaded production costs. 

The independents averaged $12,209 per loan in 2025, a 5% decline from 2024 and a 15% drop from the group’s study-high of $14,381 in 2023.  Like the depositories, sales expense accounted for the lion’s share of costs, at 60% of total costs, even as the average loan balances were substantially lower than depositories ($342,037 for independents vs $489,451 for depositories).  For both independents and depositories, fulfillment costs for processing, underwriting and closing loans accounted for only 20% of the total costs.

Over the past 25 years of this series, there have been only four years in which the average cost to originate for depositories was higher than independents: 2018, 2023, 2024, and 2025.  Depositories may be cautious about making staff adjustments in response to volume fluctuations. In addition, corporate allocations and technology costs for many depositories have escalated in recent years.  A host of other factors, from product mix to sales structure and incentive plans, also come into play in explaining cost differences.

Notes:

• The cost to originate in the retail channel includes:
  • Sales costs.  Commissions, salary, and other costs for loan officers, loan officer assistants, other sales managers and staff, marketing, sales office leases, etc. 
  • Fulfillment costs for processing, underwriting, closing, and other functions necessary to close a loan.
  • Production support allocations for post‐closing, secondary, quality control, production-specific technology, and credit policy. 
  • Corporate costs such as executive management, legal, human resources, corporate finance, corporate technology/network administration, and parent allocations.
• Want more data? Join us for the five-hour online MBA Research Showcase 2026 that takes place on Tuesday, June 23.  Recording and materials are available to registrants. 

– Marina Walsh, CMB (mwalsh@mba.org)