loanDepot NYSE: LDI reported improved second-quarter operating results as the mortgage lender expanded its home equity offering, increased purchase-market share and narrowed its adjusted net loss despite a higher-rate environment.
Chief Executive Officer Anthony Hsieh said the company is pursuing a transformation intended to support profitable market-share growth across market cycles. He said the company was making more loans faster and at lower cost, with June producing its strongest monthly results of the year.
“We are making more loans faster and at a lower cost,” Hsieh said, adding that revenue rose, operating leverage improved and the company’s net loss narrowed during the quarter.
Home equity push drives unit growth
A central part of loanDepot’s strategy has been its expansion into home equity lending, including its 5x5 Home Loan HELOC product. Hsieh said the market is supported by approximately $35 trillion of U.S. homeowner equity and provides borrowers an option to access liquidity without refinancing an existing first mortgage with an attractive rate.
Management said home equity lending is less sensitive to interest rates and less seasonal than conventional refinance and purchase lending. Although home equity loans generally have smaller balances, the company said they typically carry higher gain-on-sale revenue and lower production costs.
Loan origination volume totaled $8 billion in the second quarter, up 4% from $7.7 billion in the first quarter and within the company’s prior guidance range. On a unit basis, volume rose 25% sequentially, reflecting the shift toward smaller-balance home equity products as well as investments in loan officers.
Hsieh said the company expects home equity momentum to continue if interest rates remain near current levels. If rates decline, he said first-mortgage refinance activity would likely return more meaningfully. He added that growing HELOC production would tend to lift margins.
Chief Financial Officer David Hayes said pull-through weighted rate-lock volume declined 20% sequentially to $6.6 billion, largely because HELOCs do not generate a traditional rate lock. The measure was within loanDepot’s prior guidance range.
Margins and revenue improve as losses narrow
Adjusted total revenue rose to $308 million in the second quarter from $299 million in the first quarter. The company’s adjusted net loss narrowed to $29 million from $34 million in the prior quarter, which Hayes attributed primarily to higher adjusted revenue while expense growth was largely limited to volume-related costs.
Pull-through weighted gain-on-sale margin was 345 basis points, compared with 271 basis points in the first quarter and within the company’s guided range of 330 to 360 basis points. Hayes said the improvement principally reflected the product-mix shift toward higher-margin home equity loans. Origination income increased 60% from the prior quarter.
Servicing fee income increased to $112 million from $109 million in the first quarter, driven by a larger portfolio and higher interest credited on escrow balances, Hayes said. The company said it dynamically hedges its servicing portfolio to help limit volatility in earnings and liquidity.
Total expenses increased by $2 million, or less than 1%, from the first quarter. Higher commissions and direct origination expenses associated with increased production were partly offset by operating-leverage improvements, management said.
Purchase share, loan officer count rise
Hsieh said loanDepot increased purchase-market share by 33% in the second quarter, supported by additions of builder partners in its joint-venture channel and new retail branch locations. He said the company believes it is the leading independent mortgage company financing new-home construction for builders.
The company also expanded its loan officer base. Net loan officer count increased 18% over the past year, including graduates of its proprietary ACES training program in the direct channel and experienced retail loan officers.
- Return on marketing increased 70% over the past year.
- Marketing lead-to-funded-loan conversion increased 50%.
- Marketing cost per funding declined 34%.
- Total cost per funded loan declined 12%.
- Funded loan units per loan officer increased 18%.
Hsieh said the company’s reintroduced wholesale channel is ahead of schedule after roughly five or six months, though he characterized it as a complement rather than a planned major contributor to production.
Third-quarter outlook and capital actions
For the third quarter, loanDepot expects pull-through weighted lock volume of $5.25 billion to $7.25 billion and closed origination volume of $6.25 billion to $8.25 billion. The company forecast pull-through weighted gain-on-sale margin of 360 to 390 basis points.
Hayes said total expenses are expected to decline somewhat in the third quarter, aided by repurchases of corporate debt at a discount, though higher home equity volume is expected to add some volume-related costs. The company has begun implementing approximately $12 million of annualized productivity initiatives that are expected to progress through the remainder of the year.
loanDepot ended the quarter with $229 million in cash, down $48 million from the first quarter. Post-quarter-end, the company monetized approximately $10 billion of mortgage servicing rights, with settlement expected later in the year. During the quarter, it repurchased $16 million of senior notes at an average price of 90% of par, followed by an additional $27 million repurchased through July 30 at an average price of 86% of par.
Management said addressing bond maturities remains a priority and that it is evaluating capital-structure alternatives with retained advisers. Hsieh said the company will continue investing in technology, automation and AI-enabled capabilities to improve productivity, customer acquisition and operating leverage.
About loanDepot (NYSE:LDI)
loanDepot, Inc NYSE: LDI is a leading non-bank consumer lender that provides a broad range of home and personal financing products through a digitally enabled platform. The company specializes in originating and servicing purchase and refinance mortgage loans, home equity lines of credit (HELOCs), and personal loans. Through its proprietary mello™ technology suite, loanDepot streamlines the application, underwriting, and closing processes for borrowers and real estate professionals, emphasizing speed, transparency, and a seamless digital experience.
Founded in 2010 by Anthony Hsieh, loanDepot has grown rapidly to become one of the largest independent mortgage lenders in the United States.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider loanDepot, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and loanDepot wasn't on the list.
While loanDepot currently has a Reduce rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Click the link to see MarketBeat's list of seven stocks and why their long-term outlooks are very promising.
Get This Free Report
