Loandepot narrows losses as CEO Hsieh mulls turnaround

Some of Loandepot's finances are moving in the right direction but the company remains mired in the red. 

The lender and servicer Thursday disclosed a $25 million net loss for the second quarter, after posting a $40.7 million net loss in the first quarter. It's a marked improvement from last spring, when the company factored in a massive accrual related to a data breach in its $65.9 million net loss. 

The mortgage giant recorded a brief profit in the third quarter last year, but has been reeling since the end of the refinance boom.

While Loandepot posted stronger origination volume of $6.7 billion compared to prior quarters, its pull-through weighted gain-on sale margin fell 15 basis points from the end of March to 330 basis points. The pull-through weighted GOS was also up just 8 basis points from the same time last year.

Founder and CEO Anthony Hsieh, who shed his interim tag last month, acknowledged his company's struggles but recalled Loandepot's growth in the past decade as one of the industry's leading brands. 

"We must achieve scale," he said during a conference call. "The company, unfortunately, our market share over the last few years, has shrunk. And as a result of that we lost some scale. You need your variable costs to kick in so it can carry your fixed costs. So that's the first order of business."

How Loandepot's finances fared in Q2

The company posted revenue of $282.5 million, up 3% and 6% from the quarter and year-ago periods. Expenses also declined slightly, but fell just 1.5% from March to $314.8 million over the spring. Part of that decline was due to one-time benefits in salary and general administrative expenses, and Chief Financial Officer David Hayes expects total expenses to tick back up this quarter.

"Direct origination expenses were down 7% during the quarter, despite a 30% increase in origination volume which benefited from renegotiated vendor contracts and loan origination process improvements," said David Hayes, chief financial officer. 

The company's unpaid principal balance grew to $117 billion, and Loandepot reported servicing fee income of $108.2 million, up slightly from March but down $17 million from the second quarter last year. 

Loandepot touts $4 billion of funding capacity, with $1.6 billion available at the end of June. It also grew its coffers, with cash and cash equivalents rising slightly from the beginning of the year to $408 million.

Hsieh's vision for Loandepot's future

Earlier this week Hsieh tapped two former architects of the firm's loan origination system, mello, to executive roles. The company also announced longtime LDI Mortgage president Jeff Walsh will retire in September. Walsh has been with the company since 2012; a successor was not immediately named. 

"He's deeply admired by our sales people and respected by everyone who's had the opportunity to work with him," said Hsieh.

In discussing his company's rebound, Hsieh cited the company's stable servicing and numerous joint ventures with homebuilders. He also eyed increasing Loandepot's "fairly low" market share in refinances and second mortgages.

"It is not something that we haven't done before," he said. "But obviously we need to be very very cautious, particularly understanding some of the tools that we have available today while we continue to enhance our technology tools."