loanDepot's third-quarter loss widened to $28.7 million as mortgage production declined, putting fresh pressure on a turnaround strategy that CEO Anthony Hsieh acknowledged requires a fundamental change to the lender's operating model.
"This company was never designed to carry this type of cost structure with the little volumes that we currently enjoy," Hsiehsaid during the company's Nov. 9 earnings call.
The admission cuts to the heart of loanDepot's challenge. The lender is generating stronger margins and originating more loans, but those gains have yet to translate into profitability. Management is now relying on home equity lending, cost reductions, and a broader distribution network to help close that gap by 2027.
According to its third-quarter earnings release, loanDepot's net loss increased from $6.6 million in the second quarter and $8.7 million a year earlier. Revenue fell 9% sequentially to $307.1 million, while expenses declined just 2% to $335.7 million.
The adjusted results tell a less dramatic story. Excluding certain items, loanDepot reported a $30.8 million loss, compared with $29.4 million in the previous quarter. Adjusted EBITDA remained positive at $16.9 million, down from $20.3 million.
The results mark a setback from the second quarter, when loanDepot had narrowed its reported loss and pointed to improving production economics as evidence that its restructuring was gaining traction.
More Loans, Less Volume
loanDepot originated $7.05 billion in mortgages during the quarter, down 12% from $7.99 billion in the second quarter. Yet funded loan units increased 7%, reflecting the company's growing emphasis on smaller-balance home equity products.
That shift is changing the economics of its business.
Overall gain-on-sale margin increased to 318 basis points from 286 basis points, while pull-through weighted gain-on-sale margin climbed to 399 basis points from 345 basis points.
Hsieh described home equity lending as a permanent strategic growth category, rather than a temporary response to weak refinancing demand.
The company estimates it ranked among the three largest nonbank home equity lenders by volume during the quarter, based on its analysis of industry data and internal estimates.
Home equity products allow loanDepot to reach homeowners who want to access accumulated equity without giving up low-rate first mortgages. They also provide an opportunity to generate higher margins on smaller loans, although the company's declining dollar volume shows how different that business looks from traditional first-mortgage production.
Cutting Costs While Expanding Distribution
loanDepot has increased its expected annualized savings from productivity initiatives to $25 million, up from its previous $12 million target. The company expects to realize those savings through the remainder of 2026.
The reductions come alongside continued investment in technology, retail LOs, and builder partnerships.
Purchase mortgages accounted for 61% of third-quarter originations, up from 57% in the previous quarter. Hsieh said the company increased its purchase mortgage market share by 9% from a year earlier.
On Tuesday, loanDepot announced a new joint venture with Davidson Homes, expanding its builder-affiliated lending strategy across six states.
The arrangement follows earlier partnerships designed to bring mortgage financing directly into the homebuying process, giving loanDepot access to borrowers through builder relationships rather than relying solely on traditional retail referrals.
loanDepot also returned to wholesale lending earlier this year, although management has characterized that channel as a complementary business rather than a primary growth engine.
Hsieh suggested the industry's broader contraction could create opportunities for lenders that maintain their distribution capacity.
"We’re seeing competitors either close down locations, offer themselves up for sale or shrink their teams," he said.
His comments point to another dimension of loanDepot's strategy: expanding its reach while competing lenders reduce capacity. The company is pursuing that opportunity even as it works to bring its own expenses in line with production.
Servicing Sales and Debt Reduction
The turnaround also depends on loanDepot's ability to manage its debt and preserve liquidity.
During the third quarter, the lender completed the sale of approximately $10 billion in agency mortgage servicing rights and repurchased $87 million in senior notes at an average price of 88% of face value.
Together, the transactions reduced net debt obligations by approximately $114 million, according to CFO David Hayes.
An additional $9 billion sale of government mortgage servicing rights closed in October.
loanDepot ended September with $214.4 million in cash and cash equivalents, down from $229.1 million in June. Total equity declined to $310.9 million from $333 million.
Hayes said the company is working with financial advisers and financing counterparties to refinance or extend upcoming debt maturities.
Selling servicing rights provides capital and reduces balance-sheet exposure, but it also means giving up future servicing income associated with those loans. For loanDepot, the transactions reflect the financial demands of restructuring while the origination business remains unprofitable.
The company has also faced mounting pressure in the public markets. loanDepot shares closed Tuesday at 48 cents, down roughly 46% from Aug. 21, when the lender received a warning from the New York Stock Exchange for failing to meet its minimum share-price requirement. The company has six months from that notice to regain compliance and has said it could pursue a reverse stock split if necessary.
Another Difficult Quarter Ahead
loanDepot expects fourth-quarter origination volume of $4.5 billion to $6.5 billion, below the $7.05 billion recorded in the third quarter.
Management anticipates further margin improvement, forecasting a pull-through weighted gain-on-sale margin of 425 to 465 basis points, compared with 399 basis points in Q3.
During the earnings call, Hsieh expressed confidence that the company could reach break-even profitability by the first half or middle of 2027, assuming market conditions remain near current levels.
That outlook leaves loanDepot pursuing profitability with less production, even as its home equity business delivers higher margins.
loanDepot's experience illustrates the limits of improving loan-level economics without generating enough revenue to support the broader operation.
Its strategy has produced more funded loans, stronger margins, and lower production costs than a year ago. The next stage requires those improvements to translate into earnings, with management forecasting another decline in origination volume before year-end.
