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For the third time in two months, loanDepot has reduced its capacity to fund loans by $500 million – a combined reduction of capacity totaling $1.5 billion.
In the latest filing, dated Sept. 30, loanDepot said it decided to reduce its funding capacity “based on current and projected mortgage loan originations” by exercising its right to prepay in full its 2021-2 securitization facility and terminating:
- Its Master Repurchase Agreement, dated April 23, 2021 (as amended) with Mello Warehouse Securitization Trust 2021-2 (MWST 2021-2);
- Its indenture, dated April 23, 2021, with MWST 2021-2 as issuer, loanDepot as servicer, and U.S. Bank Trust Co. N.A. as successor in interest to U.S. Bank N.A. as indenture trustee and note calculation agent, and
- Certain ancillary agreements.
The company said the MWST Notes were backed by a revolving warehouse line of credit, secured by newly originated, first-lien, fixed-rate or adjustable rate, residential mortgage loans that were originated in accordance with the criteria of Fannie Mae, Freddie Mac, or Ginnie Mae.
loanDepot added that no borrowings are currently outstanding under the 2021-2 securitization facility, and said it did not incur any termination penalties.
In an emailed statement, the company said it regularly evaluates and adjusts its funding capacity to align with current market conditions and expected mortgage volumes, "which, as we made clear during our second-quarter earnings call, we are forecasting below $2 trillion for 2023, or a 55% decrease from 2021’s $4.4 trillion."
The statement added, "The reduction of our funding capacity is in line with volume projections, and also a way to reduce expenses as many of our lending facilities charge non-usage fees. We are confident in our ability to increase our funding capacity in the future as market conditions change."
This is the third time loanDepot has notified the SEC that it is reducing its funding capacity in recent months. The first filing was posted on Aug. 19, which was followed by a second on Sept. 23. The two previous notices also involved prepaying securitization facilities in full, and each also was valued at $500 million.
The $1.5 billion in reductions follow the company’s announcement on Aug. 9 that it would exit the wholesale lending business. That decision was announced as it released its earnings for the second quarter of 2022, which showed a net loss of $223.8 million, or 66 cents per diluted share, its second-consecutive quarterly loss.
The company said loan origination volume in the quarter totaled just under $16 billion, down nearly 26% from the first quarter and down nearly 54% from the second quarter of last year. Purchase volume increased to 59% of total originations, the company said.
President & CEO Frank Martell said during a second-quarter earnings call that loanDepot made a “strategic decision” to exit the wholesale business.
The company also has eliminated nearly 4,000 jobs since the end of last year.Since its inception in 2010, loanDepot has funded over $275 billion in loans, and currently ranks as the second largest retail nonbank lender in the U.S.