Skip to main content

LoanDepot Faces Lower Origination Volume And Profit Margins In Q2 2021

Katie Jensen
Aug 04, 2021

Lower profit margins resulted from industry overcapacity and increased competitive pressure, particularly in the wholesale channel.

KEY TAKEAWAYS
  • Loan origination volume fell 17% from the first quarter of 2021, totaling $34.5 billion, or a decrease of $7 billion. 
  • Quarterly total revenue decreased 41% year-over-year, totaling $779.9 million, which is $536.1 million less than last year.
  • The rise in interest rates resulted in lower refinance transaction volume, yet purchase transactions increased 87% year-over-year.
  • Net income for the second quarter of 2021 decreased to $26.3 million as compared to $427.9 million in the prior quarter.

LoanDepot Inc., provider of consumer lending and real estate services, announced their results for the second quarter of this year, ending on June 30, 2021. Although loanDepot’s consumer-centric and diversified origination strategy gained them a slight increase in market share year-over-year, origination volume and profit margins are still lower than last year. 

Lower profit margins resulted from industry overcapacity and increased competitive pressure, particularly in the wholesale channel, according to the report. During the second quarter of 2021, the company’s Retail Channel accounted for $27.9 billion, or 81%, of our loanDepot’s originations. However, the Partner Channel accounted for $6.6 billion, or only 19%, of loanDepot’s loan originations. 

LoanDepot founder and CEO Anthony Hsieh, said, “While our revenues were lower on decreased gain on sale margins and rate lock volume during this transitional quarter, our investments and commitment to our core business philosophy continue to fuel our momentum, especially as the industry becomes less fragmented and consumers rightfully demand more robust and integrated products and services from their lender.”

The rise in interest rates resulted in lower refinance transaction volume, yet purchase transactions increased 31% from the first quarter, up 87% year-over-year. Still, strong demand for purchase transactions is somewhat adversely impacted by the constraint on new and resale housing. 

LoanDepot’s Retail and Partner strategies delivered $10.4 billion of purchase loan originations and $24.1 billion of refinance loan originations in the second quarter of 2021. Loan origination volume fell 17% from the first quarter of 2021, totaling $34.5 billion, or a decrease of $7 billion. 

Quarterly total revenue decreased 41% year-over-year, totaling $779.9 million, which is $536.1 million less than last year.

Additionally, net income for the second quarter of 2021 decreased to $26.3 million as compared to $427.9 million in the prior quarter. This decrease was primarily driven by the decline in sales margin and an increase in servicing rights fair value losses, net of hedge. 

Moving forward, loanDepot will have a sharper focus on industry consolidation and expansion of ancillary products and service to capture additional revenue service. 

Hsieh said, “We will meet and exceed these demands with our just announced loanDepot Grand Slam package that will give homeowners access to real estate, mortgage, title and insurance services within one bundle for their home transaction, increasing ease, speed and peace of mind, all while reducing overall cost to the customer.” 

"We can express this confidence," continued Hsieh, "because our diversified channel strategy, which is the industry's only at-scale model of this type, and proprietary mello-tech stack allow us to continually reduce costs and maximize operational elasticity, so that our loan manufacturing process is true to any given market environment…We are confident we will continue to accelerate our growth, increase our market share and outperform in the long term.” 

Cost-cutting initiatives were implemented late into the second quarter, but the results won’t be realized until later on in the year. LoanDepot’s technology-driven process allows them to adjust expenses to changing market conditions and adjust the pipeline to balance operational capabilities.

“We've entered a transitional period and expect to see industry consolidation as some lenders may not be in a position to withstand the headwinds, whereas we are confident and excited for the future,” Hsieh added. “Eleven years ago we set out to reshape the mortgage industry with a new, digital-first approach that would thrive across all market conditions. This is why, despite the transition in the mortgage market, we continued to grow in the second quarter with meaningful increases in both market share and purchase loan originations.” 

For more information on loanDepot’s second quarter results, please visit investors.loandepot.com/financials/sec-filings

 

Published
Aug 04, 2021
CFPB Outlines Consumer Complaint Patterns By Demographic

The Consumer Finance Protection Bureau's recent research brief reported that wealthier communities and those with a higher percentage of white residents tend to have more complaints about loan origination and servicing.

Analysis and Data
Sep 24, 2021
Homeowners Rack Up $2.9T In Equity In Q2 2021

Latest research from CoreLogic's Homeowner Equity Report revealed that U.S. homeowners with mortgages experience an equity gain of 29.3% year-over-year.

Analysis and Data
Sep 24, 2021
Migration Cools Down Slightly By Summer's End

While house hunters continue to migrate at a higher rate than they did earlier on in the pandemic, migration has slowed its pace this past summer as life in the U.S. has somewhat returned back to normal. 

Analysis and Data
Sep 23, 2021
Home Prices In Florida Surge This Quarter

The Florida housing market reported higher median prices with more new listings and a rise in all-cash sales in August compared to last year. 

Analysis and Data
Sep 23, 2021
Existing-Home Sales Retreat In August 2021

The National Association of Realtors reported a 2% decline in existing-home sales on a seasonally adjusted rate from July to August 2021.

Analysis and Data
Sep 23, 2021
Demand Strongly Outpaces Inventory In New York

Nationwide, a shortage of homes for sale is plaguing the housing market and this is especially true in New York, where the inventory of homes for sale has fallen for 22 consecutive months in year-over-year comparisons.

Analysis and Data
Sep 23, 2021