LoanDepot returns to profitability and announces new strategic plan
loanDepot achieved profitability in the third quarter of 2024, ending an eleven-quarter streak of financial losses. Cost reductions and revenue growth drove this turnaround, while lower interest rates boosted refinancing activity.
As a result, LoanDepot is withdrawing its Vision 2025 strategic plan, which launched in July 2022 to help the company reduce its non-volume costs by more than $730 million.
Vision 2025 will be replaced by a program called Project North Star that focuses on homeownership. It emphasizes first-time buyers in the housing market; purchasing loans through a larger geographic footprint and partnerships; maintaining scale and preservation of the portfolio; operational leverage quality to shorten lead times; and recruiting, developing and retaining the best available talent.
“The launch of Project North Star builds on the strategic pillars of Vision 2025, including our focus on sustainable revenue growth, positive operating leverage, productivity and investments in platforms and solutions that support our customers’ homeownership,” said Frank Martell, president and CEO of LoanDepot. said in a statement.
On Tuesday, California-based LoonDepot reported non-GAAP adjusted net income of $7 million for the third quarter of 2024, compared with a loss of $15.9 million in the second quarter of 2024 and a loss of $29.2 million in the third quarter of 2023. Under GAAP accounting standards, net income in the third quarter of 2024 was $2.6 million.
Chief Financial Officer David Hayes said in a statement that there was a “modest improvement in the mortgage market in the third quarter, coupled with the company’s positive operating leverage,” fueling the return to profitability.
“As we look to 2025, we expect continued market challenges, but we believe the implementation of Project North Star will allow us to capture the benefits of higher market volumes while continuing to capitalize on our continued investments in operational efficiencies to drive sustainable achieve profitability. in a wide variety of operating environments,” said Hayes.
As an example of initiatives included in the new plan, the lender this week announced a joint venture agreement with Smith Douglas Homesa top 50 homebuilder with a solid track record in the southern states. During an earnings call, executives told analysts that LoanDepot is looking for more joint ventures with builders, real estate agents and private lenders across the country.
According to documents at the Securities and Exchange Commission (SEC), LoanDepot’s third quarter costs were $311 million, down 9% quarter-over-quarter and up 1.9% year-over-year. The increase was primarily due to higher commissions, direct origination costs, and marketing and overtime, which reflect the increase in volume.
Costs may increase as the company continues to add loan officers and operations team members. The company expects supplier costs to increase in 2025, as they did in 2023 and 2024.
Meanwhile, the company’s total revenues reached $314.6 million in the third quarter of 2024, up more than 18% on both a quarter and year-over-year basis.
Operational biz
LoanDepot returned to profitability as mortgage production and volume increased. Production volume between July and September was $6.7 billion, which is at the high end of investor expectations and up from $6 billion in the previous quarter. Profit on sales margin was 3.29% in the third quarter of 2024, compared to 3.22% in the second quarter of 2024.
In August, LoanDepot added a First-Lien Home Equity Line of Credit (HELOC) to its product suite, allowing homeowners to borrow against their home equity without a mortgage. In September, it hired military lawyer Bryan Bergjans to boost its lending capacity in the US The U.S. Department of Veterans Affairs (VA) space.
Purchase loans represented 66% of LoanDepot’s total volume in the third quarter of 2024, up from 71% in the same period in 2023. Meanwhile, the company’s organic consumer direct refinancing rate was 71%, up from 69% a year ago .
Regarding LoanDepot’s servicing portfolio, unpaid principal balance (UPB) increased to $114.9 billion at September 30, compared to $114.3 billion at June 30. Service fee revenues decreased to $124 million in the third quarter of 2024, compared to $125 million in the previous quarter.
Company executives forecast fourth-quarter 2024 production volume of $6 billion to $8 billion. The profit on sales margin is expected to be between 2.85% and 3.05%. LoanDepot ended the quarter with $480 million in cash.
I’m looking forward to the Association of Mortgage Bankers‘s forecast of $2.3 trillion in industry-wide production volume by 2025, Martell said, “We feel pretty good about our monetization opportunity,” adding that “it’s a fluid situation with regard to to the rates.”
After the earnings announcement, loanDepot stock was trading at $2.35, up 9.3% in the after-hours.
