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loanDepot's 'Vision 2025' Includes Massive Job Cuts

Steve Goode
Jul 12, 2022
loanDepot

About 2,000 more people expected to leave the company by the end of the year.

KEY TAKEAWAYS
  • Vision 2025 includes an emphasis on underserved communities and growing HELOC business.
  • The company also plans to reduce its physical footprint.

California-based loanDepot, a national mortgage funder, announced a plan Tuesday to return to profitability by the end of 2022 and beyond.

The plan, named Vision 2025, calls for the company to save $375 million to $400 million on an annualized basis, mostly through 2,000 job reductions. 

Company officials said they began the year with 11,300 employees, had 8,500 as of June 30, and plan to reduce that number to 6,500 by the end of the year. The plan also calls for the consolidation of real estate as the workforce shrinks.

The plan, according to loanDepot President and CEO Frank Martell, will address current and anticipated mortgage market conditions and position the lender for sustainable long-term growth that includes an emphasis on working with underserved communities..

"In 2020 and 2021, like other mortgage companies, we scaled our organization to meet the demands of unprecedented mortgage volumes, especially refinancing transactions,” Martell said. “After two years of record-breaking volumes, the market has contracted sharply and abruptly in 2022. We are taking decisive action to meet this challenge head on.”

In May the company suspended dividends after a $91 million first-quarter loss. In June the company laid off an undisclosed number of employees, but officials said Tuesday that the new plan is “far more than a cost-cutting exercise.” The company's second-quarter results will be reported Aug. 9.

 "We are executing our Vision 2025 plan on a foundation of a strong balance sheet and ample liquidity, with a current cash position of approximately $1 billion,” said loanDepot CFO Patrick Flanagan. “We anticipate continued challenging market conditions, with mortgage originations projected to decline by roughly half in 2022 from 2021, including an accelerated decline in the second half of 2022, followed by a further decline in 2023.”

Flanagan added that the company continued to reduce costs significantly in the second quarter, and expects to accelerate those efforts over the next two quarters to further drive down costs in order to end the year in the black,

“After two years of substantial headcount and expense growth that was necessary to support unprecedented origination volumes, we are returning to previous levels of staffing and expense,” he said.

Beyond job reductions, a reduced footprint and some cuts to the marketing budget, company officials said Vision 2025 is made up of four key components. They are:

Increasing the focus on purchase transactions while better serving increasingly diverse communities across the country.

Officials said the company plans to build on its strong foundation to continue meeting the needs of first-time homebuyers and underserved communities. For example, 70% of new homeowners between 2020 and 2040 will be Hispanic, according to the Urban Institute's 2021 report, "The Future of Headship and Homeownership." 

Officials said that as loanDepot pivots to an increasingly purpose-driven organization, it expects to increase its focus on addressing persistent gaps in equitable housing through initiatives that expand access to credit, such as Special Purpose Credit Programs, while advancing the goal of growing its share of lending for purchase transactions and maintaining responsible management of credit risk. To help achieve the goal, officials said they plan to work more closely with GSEs who are already focusing on that segment of the homebuying population.

The company also expects to execute previously announced initiatives, including the launch of an all-digital home equity line of credit (HELOC) by the fourth quarter of 2022.

With a data and technology-driven application process, this competitive product is designed to give homeowners efficient access to their record levels of home equity in as little as seven days, officials said.

The company will also continue to invest in its in-house servicing business to complement its origination strategy and serve its customers through the entire mortgage journey. 

The company is also centralizing management of originations and loan fulfillment to improve quality and effectiveness.

To achieve that goal, officials said the following organizational structure will be put in place:

  • All mortgage origination functions will be led by LDI Mortgage President Jeff Walsh.
  • All digital lending and mortgage-adjacent products and services will be led by LDI Digital Products and Services President Zeenat Sidi.
  • All loan fulfillment and servicing functions will be led by LDI Managing Director of Operations and Servicing Dan Binowitz.

Lastly, loanDepos said it is focused on aligning its cost structure for current and expected mortgage origination volumes. 

Company officials said Tuesday that severance and benefits-related payments of approximately $3.5 million to $4.5 million are expected to be recorded in the second quarter of 2022. Other non-operating expenses expected to be incurred in the second quarter related to these efforts include approximately $2 million of real estate exit costs and approximately $2.5 million to $3 million of outside service expenses, officials said. 

loanDepot also expects to incur additional non-operating expenses during the second half of 2022 as part of the realignment of its cost structure, including severance and benefits-related charges currently anticipated between approximately $25 million and $28 million, charges related to the exit of real estate between approximately $2.5 million and $3.5 million, and $7 million to $9 million in outside service costs. 

Officials said that as part of the loanDepot’s regular and ongoing reporting process, management determined it was necessary to complete an evaluation of its goodwill and intangible assets during the second quarter and recorded a non-cash impairment charge of $42 million as of June 30. 

Editor's note: This story has been updated to reflect that the anticipated savings are on an annualized basis and will not be reached by the end of the year.

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