Despite the results, four of the top 10 depositories sold more loans into the secondary market in 2013 than they did the year prior.

“Not only will FHA continue to go after the big banks, but they’re going after the mid-sized banks as well,” said Andrew Henscel, whose firm defends originators.

The nation’s banks and thrifts used a combined $406.1 billion in advances as of Dec. 31, 2013, up 26.7 percent from the third quarter and a 21.6 percent increase from the same period a year earlier.

Mortgage banking is an ugly business right now, but lenders are hoping that the first quarter will prove to be the nadir and that better times are ahead.

Meanwhile, Ocwen’s board recently increased the maximum bonus amount for senior level executives to $3 million per year from $2 million.

Ocwen's stock has been floundering of late, but its payroll is headed north on a rocket.

The only spurt of growth in the MBS market was in the non-agency sector, where new issuance was up 36.5 percent from the fourth quarter.

“When a servicer recognizes losses on loans previously modified with forbearance, it could significantly impact cash flows across the capital stack,” writes Bank of America Merrill Lynch.

Mortgage bankers have been complaining loudly about escalating compliance costs since the CFPB opened its doors in 2011. Some smaller nonbanks have cited those rising costs as one reason they might be forced to merge with better capitalized institutions.

“Watt will want to draw a line of demarcation between him and DeMarco,” said one source. “Going forward, I think we’ll see an emphasis on average credit scores funded and even servicing performance.”