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LoanDepot executives say they’re in a better position to grow after restructuring debt and boosting second-quarter revenue to the highest level since the start of the 2022 market downturn.
But $27 million in expenses tied to the pending settlement of a January cybersecurity attack affecting nearly 17 million clients weighed on second-quarter earnings, with the Irvine, California-based lender posting a $65.8 million net loss Tuesday.
That’s down 8 percent from the $71.5 million net loss loanDepot racked up in Q1, with net revenue growing 19 percent to $265.4 million. Excluding a $12.6 million write-down in the fair value of loanDepot’s mortgage servicing rights portfolio, adjusted total revenue rose to $278 million — the highest mark in two years.
“During the second quarter, by most measures, we delivered our strongest operational results since the beginning of the market downturn that began in the first quarter of 2022,” loanDepot President and CEO Frank Martell said in a statement. “As we near the completion of our Vision 2025 strategic plan, which was launched in July 2022, we have dramatically improved our operational results while positioning the company for long-term success.”
Shares in loanDepot, which in the last year have traded for as little as $1.14 and as much as $3.47, were up 4 percent to $2.15 in after-hours trading following Tuesday’s earnings release.
LoanDepot mortgage originations by purpose
Source: LoanDepot earnings reports.
At $6.09 billion, loanDepot’s Q2 mortgage originations were essentially unchanged from a year ago. But purchase lending picked up 33 percent from Q1, to $4.38 billion, and refinancing grew 35 percent to $1.71 billion.
“This quarter, the company continued to build our in-market retail franchise, which contributed to our expanded margins and market share growth,” Martell said. “In addition, we believe the company is increasingly well positioned to capitalize on the record levels of home equity available to homeowners for debt consolidation and home improvement, as well as the inevitable increase in rate and term refinance volume as mortgage interest rates are expected to decrease.”
LoanDepot reduced its debt load by $137 million and extended its maturity to 2027 through a tender and exchange of $500 million of corporate notes that were due in the fourth quarter of 2025.
It accomplished that feat in part by selling $29 billion in mortgage servicing rights (MSRs), leaving loanDepot with a $114.3 billion MSR portfolio as of June 30, a 20 percent drop from March 31. The nation’s largest mortgage lender, United Wholesale Mortgage, is pursuing a similar strategy on an even larger scale, trimming its MSR portfolio by $110 billion this year.
LoanDepot nevertheless continues to collect monthly mortgage payments on 403,302 loans on behalf of investors, earning $125 million in Q2 servicing fee income.
Trimming its MSR portfolio and restructuring its debt left loanDepot with a stronger balance sheet, including $533 million in cash.
The $26.94 million in expenses related to the January cyberattack recognized by loanDepot in Q2 bring the total cost of the attack to $41.6 million after factoring out expected insurance recoveries. Those expenses include the cost to investigate and remediate the incident, costs of customer notifications and identity protection, professional fees including legal expenses, litigation settlement costs and commission guarantees.
During the second quarter, the company set aside $25 million in connection with an expected settlement of a class action lawsuit related to the cyberattack.
David Hayes
LoanDepot reached “a settlement in principle” and is currently negotiating the terms of a settlement agreement that’s expected to be submitted for court approval later in the third quarter, Chief Financial Officer David Hayes said.
“We believe the settlement will remove significant uncertainty for our stakeholders going forward,” Hayes said in a statement.
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