loanDepot, a California-based lender, for the third quarter of 2023 posted its sixth consecutive quarterly loss. However, the lender also saw financial improvements as higher margins helped offset the declines.
“We delivered our third successive quarter of significantly lower operating losses driven by margin expansion and the continued benefits of cost reduction, productivity, and operating leverage," President and CEO Frank Martell said. "Importantly, we also benefited from contributions from our servicing platform, builder partnerships, and home equity lending."
Martell expressed confidence that the company's profitability will return next year.
The company's core mortgage origination volume was $6.1 billion, a decrease of $0.2 billion or 3% for the quarter. The pull-through gain-on-sale margin was 2.93%, up from 2.85% in the second quarter.
During the earnings call, Martell said the company expects to be profitable in the second or third quarters of 2024. The company's third-quarter loss of $26.8 million was smaller than its second-quarter loss of $34.3 million.
The company's chief financial officer, David Hayes, said loanDepot sold excess agency mortgage servicing rights related to unpaid principal balances totaling $12 billion, resulting in a gain of $4 million.
Here are the key takeaways:
- loanDepot's losses narrowed in the third quarter, despite lower origination volume.
- The company expects to be profitable in the second or third quarters of 2024.
- The company sold excess agency mortgage servicing rights related to unpaid principal balances totaling $12 billion, resulting in a gain of $4 million.
- It also reduced its expenses by $25 million, or 8%, since the second quarter, primarily due to lower salaries and benefits resulting from a lower headcount and legal expenses.
"The decrease in revenue is primarily result of lower loan origination income from a decrease in rate lock volume, offset somewhat by a higher gain on sale margins in servicing revenue," Hayes said. "Our higher gain on sale margin was primarily due to an increase in profit margins on our HELOC product, continued improvement in our repurchase activity, and wider profit margins on our production, offset by a larger proportional contribution from our joint venture channel."
Looking ahead to the fourth quarter Hayes said they expect origination volume of between $4 billion and $6 billion and pull-through weighted rate lock volume of between $3.8 billion and $5.8 billion.
It only accrued $2 million in legal expenses this quarter as its leadership battle comes to an end.
In April, loanDepot resolved internal discord between its founder and chairman, Anthony Hsieh, and the board of directors. Several months later, the firm announced the departure of four senior executives.
The organizational shifts were accompanied by a decision to merge LDI Digital, which includes mellohome, into its existing production channels, with the oversight now handled by LDI Mortgage President Jeff Walsh.
