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loanDepot Reducing Its Funding Capacity

Aug 25, 2022
loanDepot

Tells regulators it will prepay a $500 million securitization facility.

Just 10 days after announcing it would shutter its wholesale lending business, loanDepot told federal regulators it plans to reduce its funding capacity.

In a filing with the Securities & Exchange Commission (SEC) dated Aug. 19, the nation’s second-largest retail mortgage lender said it made the decision “based on current and projected mortgage loan originations.”

The filing states that loanDepot will reduce its funding capacity by “exercising its right to prepay in full its 2020-2 Securitization Facility,” and by terminating a master repurchase agreement dated Dec. 17, 2020, by Mello Warehouse Securitization Trust (MWST) 2020-2, as well as its indenture, also dated Dec. 17, among MWST, loanDepot, and U.S. Bank National Association as trustee. loanDepot said it will also cancel certain related agreements. 

According to the filing, MWST 2020-2 initially issued $500 million of notes. 

“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,” according to the filing. It said the loans were “originated in accordance with the criteria of Fannie Mae or Freddie Mac for the purchase of mortgage loans, or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans and other eligibility criteria set forth in the MRA.”

loanDepot added that “no borrowings are currently outstanding under the 2020-2 Securitization Facility, and the company did not incur any termination penalties as a result” of terminating the securitization facility.

A spokesman for loanDepot said the company would have no further comment beyond the filing.

loanDepot said on Aug. 9 that it would exit the wholesale lending business, making the announcement as it released its earnings for the second quarter of 2022. loanDepot reported a net loss in the quarter 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 the earnings call that 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.”

Martell 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.”

The company is also in the midst of executing its Vision 2025 plan, which it announced in July and is expected to generate approximately $375 million to $400 million of annualized savings by the end of this year. That plan includes significantly reducing its workforce from 11,300 at the end of 2021 to about 6,500 by the end of this year.

About the author
David Krechevsky was an editor at NMP.
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