Loandepot pledges more cost-cutting as earnings dip

Loandepot sank deeper into the red in the final quarter of 2023 but said greater servicing income and better gain-on-sale margins mitigated the impact of fewer originations.

The lender and servicer posted a $59.7 million net loss in the fourth quarter, down 71% quarterly, it said Tuesday. The recent performance was significantly better however than the $157.7 million net loss Loandepot had over the fourth quarter in 2022. 

Pull-through weighted lock volume of $4.4 billion between October and December was 22% less than the prior quarter. Its gain-on-sale margin ticked up to 296 basis points, rising from 221 bps at the same time last year.

"Our higher gain-on-sale margin was primarily due to an increase in volume and profit margins of our HELOC product and wider profit margins on conforming and (Federal Housing Administration) production," said David Hayes, the firm's chief financial officer. 

The GOS number was partially offset by a seasonally larger proportional contribution from Loandepot's joint venture channel with Realtors and builders, he added. The recent quarter bumped the annual PTW GOS figure to 275 bps for 2023, compared to 194 bps in 2022.

Concerning home loan activity, the lender reported $21.5 billion in lock volume for the year against $45 billion in 2022.

Meanwhile a quarterly servicing income bump, from $120.9 million ending September to $132.4 million ending December, was aided by slower prepayments, Hayes said. 

Loandepot exited the year with a $235.5 million net loss, 61% better than its 2022 performance. That was helped by the lender's efforts in its Vision 2025 cost-cutting plan; it shaved $693 million in expenses last year. The company will continue to improve on its $1.25 billion in expenses recorded by year's end, as executives Tuesday announced another plan to slash expenses by another $120 million.

The firm's adjusted annual loss was $142.2 million; its quarterly adjusted figure was flat with a $26.6 million loss in the fourth quarter. It posted $974 million in net revenue for 2023, down 22% from 2022. 

A recent hack exposing the data of nearly 17 million customers will cost the lender between $12 million to $17 million this quarter. Executives declined to take analyst questions on the topic, but LDI Mortgage President Jeff Walsh spoke briefly on his company's incident response.

"We did regain our ability to operate fairly quickly and did a good job of hanging on to our pipeline and pulling through the loans that we had," he said. 

Those data breach expenses will dampen gains the firm anticipates in fewer marketing expenses and less restructuring costs to begin the year. 

Loandepot's borrowing power remained steady at $1.94 billion in warehouse and other lines of credit. It also counted $661 million in cash and cash equivalents moving forward. Its large servicing portfolio has an unpaid principal balance of $145 billion. 

The business is projecting volume between $3.5 billion and $5.5 billion this quarter and PTW GOS between 275 and 300 bps. 

President and CEO Frank Martell told analysts his organization continuing to downsize is poised to handle an expected volume increase this year. He referenced melloNow, the lender's automated underwriting engine it released in December which it says can deliver loan approvals in minutes rather than hours or days. 

"A lot of what we've done the last two years is really invest in fundamental systems and automation," said Martell. "So we feel pretty good about our ability to leverage those and drive the benefits of productivity operating leverage as the market does rebound."