The mortgage industry has witnessed very few mergers and acquisitions in the last year, despite what Kroll Bond Rating Agency calls a “fertile environment” for M&A activity.

Why? Blame low profits and high origination costs (the average these days is more than $8,000 per loan). According to KBRA, the climate has some banks rethinking their positions.

“Banks are taking a serious look at the viability of mortgage lending as a product offering, in particular traditional retail,” the agency wrote in a recent report. “Some banks are simply exiting mortgage lending activities, while others are selling off mortgage-related assets.”

The agency named privately held, California based Provident Savings Bank as an example, as it closed down its residential mortgage operation last month, citing challenging market conditions.

KBRA said it believes other small retail originators will follow suit as they are confronted with the challenging realities of competing in major markets.

That said, KBRA said the U.S. mortgage market is actually on “good footing” as a whole, despite flailing refi activity.

Outstanding first-lien mortgage balances totaled $9.1 trillion in the fourth quarter of 2018, down $20 billion from the previous quarter, KBRA noted. HELOC balances continued to backslide, dropping $4 billion in Q4, while delinquencies remain at historic lows.

The agency said it expects originations to experience only modest compression in 2019, which will be mostly driven by lower refi volume. But even this will improve slightly, KBRA said, as a decrease in rates should create modest refinance action.