Origination volumes in the peer group are up 33% from the first quarter and 2% on a year-over-year basis. The biggest annual gainers were Rithm and Guild, both with an over 40% increase.

The biggest declines were recorded at three banks: Wells Fargo, off 32% from a year ago; Truist, down 30%; and PNC, whose volume was 29% lower.

For the group, second quarter origination volume was $171 billion, inclusive of home equity lines of credit. This compared with $129 billion in the first quarter and $167 billion for the second quarter of 2023.

However, eight of the nine peer group companies that report gain on sale had a quarter-to-quarter decline. Group members were a median 24 basis points lower than in the first quarter and 5 basis points lower than a year ago.

For example, Rithm's were down 24 basis points quarter-to-quarter and 21 basis points versus the second quarter of 2023.

On the other hand, United Wholesale Mortgage only dropped 2 basis points from the first quarter and was 18 basis points higher than it was one year ago, BCG said.

The only company reporting an increase compared to the first quarter was Loandepot, up 22 basis points.

Going forward BCG expects those margins to contract further as the share of refinance activity continues to build.

Even though the Freddie Mac Primary Mortgage Market Survey was up 2 basis points last week, since the start of May, the average for the 30-year fixed is down 0.73 percentage points. But that is not low enough to entice most people into the purchase market, a recent Mphasis Digital Risk survey found.

Refinance traffic is on the upswing, with Optimal Blue daily rate lock data for Aug. 15 putting the share of these loans at 26.1%. While that was 1.39 percentage points lower than seven days prior, for the same day in 2023, it was 662 basis points higher.

Multiple companies that are in the report told BCG they are looking to mortgage servicing portfolios as a source of future refinance volume, as between 18% and 22% of their unpaid principal balances are loans with a mortgage rate over 6%.

"Companies are expanding product portfolios to address the pain points of potential borrowers (e.g. zero down payment, digital HELOCs, one-day mortgages)," BCG said. "Our clients are exploring optimal product portfolios that drive consistent revenue through the mortgage cycle while meeting the specific needs of potential customers."

BCG suggested that mortgage companies should consider creating partnerships in the real estate ecosystem to make the home buying experience appear seamless and integrated to consumers.

Meanwhile, the IMB peer group continues to take market share from the banks, with originations up 9% and servicing up 8%; the bank group was down 14% and 5% respectively.

That is likely to shift even further as Mr. Cooper acquires the third party originations and servicing portfolio of Flagstar from New York Community Bancorp.

The latest data BCG has is for the first quarter, where the IMBs had a 58% share of MSRs owned versus 42% for the banks. Just five years' prior, the split was banks at 54% to nonbanks' 46%, while in the first quarter of 2015, it was 70% to 30% in favor of the banks.

In its interviews with top servicers, BCG found five themes. First, servicers find it difficult to predict borrower needs. They struggle to keep up with increased scrutiny by regulators regarding compliance.

The servicers said they lack access to recent technology and data-driven workflows. Furthermore, they expect credit quality to deteriorate and they underestimated the impact of climate issues on their portfolios. Finally, they are struggling to monetize the relationships through cross-selling.

This year's J.D. Power mortgage servicer satisfaction survey, in which 17 of the 18 companies BCG tracks received scores, was as a group higher year-over-year but concerns regarding increasing numbers of distressed borrowers are an overhang on future performance.

"Lenders/servicers are thinking of ways to best leverage their MSR assets and current customer relationships [by] building robust client databases; enhancing cross-sell opportunities; hedging against volatile origination volumes; [and] stabilizing operating cash flows," the BCG report said.

The benefits include, for example, a churn reduction of between 10% and 15%, reduced servicing call center volume and improved loss mitigation efficiencies coming from a 30% to 40% reduction in credit review costs. If they are able to accomplish this, their net promoter score would see a 10% to 20% uplift, BCG said.

Besides the companies listed above, others tracked in the BCG report are JPMorgan Chase, U.S. Bank, Bank of America, Citi, Citizens, Fifth Third, Pennymac Financial Services, Rocket and Onity (formerly Ocwen).