LoanDepot Touts HELOC, Cost Savings Amid Nine Figure Losses

LoanDepot reported nine-figure losses in the third quarter, but management is betting on the company’s significant cost savings and a new loan product that it hopes will rebound its dwindling sales gains. .

The Foothill Ranch, Calif.-based mortgage giant announced a net loss of $137.5 million in the third quarter. Loss of $223.8 million in the second quarter. Lenders and servicers posted his $154.3 million profit in the third quarter amid a booming mortgage market in 2021.

The company also incurred charges of $37.2 million in the quarter. Broad Vision 2025 cost reduction planThis includes $20.8 million in lease and other asset impairments, $9.4 million in labor costs and $7.0 million in professional services charges. In the second quarter, he spent $54.6 million on his Vision 2025 plan.

The plan, which includes layoffs to reduce the company’s workforce from 11,300 at the end of last year to 6,100, is expected to save $375 million to $400 million annually. The lender cut total expenses in the third quarter by 22% to $435.1 million, a 44% reduction from $774.7 million in the same period last year.

“Our Vision 2025 plan is having the intended effect,” President and CEO Frank Martell said on a conference call Tuesday. We have made great progress.”

From July to September, loanDepot reported a profit margin of 1.80%. That was up from the 1.16% mark last quarter and well below last year’s third quarter profit margin of 2.84%. The pull-through weighted GOS margin was 1.50% in the second quarter and 2.99% in the same period last year, and he was 2.03% in the third quarter.

Management believes that GOS margins should increase in the fourth quarter despite expected volume declines due to higher margin products and the exit from wholesale. The company expects a pull-through weighted sales margin of 210 to 270 basis points.

One of the higher margin products is Lender’s new home equity credit service, which will roll out nationwide early next year.

Chief Financial Officer Patrick Flanagan said, “We believe HELOC will magnify the diversion of marketing dollars typically spent on smaller loan balances and smaller cash out (refinancing) needs.” We look at mortgage purchases as net income, not prey.”

Martell said he expects the product to be an important contributor and profit generator for lenders in the coming year, and suggested access to the pledged capital. in as little as 7 days, faster than most competitors on the market.Borrowers had fun this summer Record levels of home equitybut very high numbers since Decline 7.6% According to Black Knight, in the third quarter.

The Company’s unpaid servicing principal balance decreased to $139.7 billion in the third quarter, compared with $155.2 billion in the prior three months, primarily due to the sale of $18.6 billion in mortgage servicing rights Did. The company’s leader has said he does not plan to sell large numbers of his MSRs in the fourth quarter.

As of the end of September, the company had $1.14 billion in unrestricted cash, more than double from $506.6 million at the same time last year.

“There are a lot of opportunities to manage our balance sheet,” Flanagan said.

LoanDepot reports pull-through weighted lock volume of $8.8 billion in the third quarter and expects it to be between $3 billion and $6 billion in the fourth quarter. Lenders have cut funding capacity by at least $1.5 billion since August Through the coordination of a series of warehouse facilities.

Warren Cornfield, senior vice president of Moody’s Investment Service, said the firm’s origination estimates are down very seriously. LoanDepot predicts he will have $1.5 trillion in loans in 2023, while Mortgage Bankers Association’s $2.05 trillion forecast.

“We are very focused on right-sizing our company for the $1.5 trillion mortgage origination market in 2023 and are more focused than our peers who rely on more optimistic origination forecasts. We are proactive,” Kornfield said in a statement Wednesday.

LoanDepot’s stock opened at $1.53 per share following Tuesday evening’s report and fell to $1.39 per share by noon.

Leave a Comment