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loanDepot Dumping Brokers, Exits Wholesale

David Krechevsky
Aug 09, 2022
loanDepot

As company reports second straight quarterly loss, it announces plans to exit its wholesale business by Oct. 31, 2022.

KEY TAKEAWAYS
  • Company calls exiting wholesale a 'strategic decision.'
  • President & CEO Frank Martell says $1B in loans remaining in wholesale channel will be funded.
  • loanDepot reported a net loss of $223.8M, its second-consecutive quarterly loss.

loanDepot, the nation’s second-largest retail mortgage lender, has so far cut nearly 4,000 jobs since the end of last year, but today said it plans to cut something else: its wholesale lending business.

The company made the announcement as it released its earnings for the second quarter of 2022, reporting a net loss of $223.8 million, or 66 cents per diluted share. It was the company’s second-consecutive quarter with a loss, after reporting a loss of $91.32 million in the previous quarter.

The second-quarter loss was due primarily to a decrease in rate lock volume and gain on sale margin, partially offset by a decrease in total expenses, the company said.

President & CEO Frank Martell said loanDepot made a “strategic decision” to exit the wholesale business.

“We are exiting our wholesale channel consistent with our strategy of becoming a more purpose-driven organization with direct customer engagement throughout the entire lending process,” he said. “Our exit from wholesale will also enable us to direct resources to other origination channels, reduce operational complexities, and increase margins.”

During a conference call with analysts, he added that “the plan is to fund out the remaining wholesale pipeline, which is approximately $1 billion, and have the entire pipeline wrapped up by the end of October of this year.”

Martell also said the company has reduced its staffing levels from approximately 11,300 at the end of 2021 to about 8,500 by the end of June 2022, and to about 7,400 by the start of August, a reduction of 3,900 people. He said loanDepot expects to end the third quarter of 2022 with “a headcount below our previously stated year-end goal of 6,500,” which means another 900 jobs remain to be cut.

The planned reductions in force had been outlined in July, when loanDepot announced its Vision 2025 plan, which it said is designed to address current and anticipated mortgage market conditions and position the company “for sustainable long-term value creation.” 

When it released the plan, loanDepot said the program is expected to “generate approximately $375 million to $400 million of annualized savings by the end of 2022,” and Martell said during the conference call that the company is “well on our way to achieving that.” 

While the Vision 2025 plan did not mention exiting the wholesale channel, it did state goals that included “downsizing to align with rapidly changing market conditions,” and serving “increasingly diverse communities across the country.”

Martell said he is “excited about our strategic pivot to a purpose-driven organization. We have a number of new digital solutions that we think … will be innovative and differentiate the company in the marketplace, and I think importantly we also have a best-in- class servicing operation which we think we can leverage for growth as well.”

Tuesday evening, the company sent an email to its wholesale lending partners to inform them of the decision to close that portion of the business. The email, signed by Nick Pabarcus, executive vice president of wholesale and correspondent lending, states that loanDepot “will exit the Wholesale channel effective October 31, 2022.”

It continues, “We are committed to remaining coordinated, transparent, and communicative throughout the wind-down period. We will continue to provide you and your borrowers the best-in-class service they have come to expect from loanDepot. We will honor all existing pipeline with current lock policies and procedures and our team will be in place to service your loans, answer your questions, and ensure the pipeline is closed out smoothly and efficiently.”

The email states that all loans currently in the mello Broker Portal are eligible for submission and funding/purchasing. 

It then outlines important dates over the coming weeks, including stating that Tuesday (Aug. 9) is the last day to create new loans in the broker portal, and that Oct. 31 will be the last day to fund the wholesale pipeline. Dec. 31, it said, will be the last day to access the mello Broker Portal.

The email concludes by stating that “loanDepot Wholesale Lending has been grateful for the opportunity to serve you and your borrowers over the last eight years and honored to earn your business. We've valued your partnership and wish you continued success.”

In its earnings report, loanDepot said loan origination volume in the second 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.

Gain on sale margin was 1.96% in the second quarter, down from 2.98% in the first quarter.

The company said cash-out refinance and purchase volume increased to 95% of total production during the second quarter, compared to 83% in the first quarter and 59% in the second quarter last year. It said the increase reflected the company’s strategy “of reducing the volatility of our revenue by focusing on less interest rate sensitive mortgage products.”

Published
Aug 09, 2022
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