LoanDepot Sees ‘Normalizing’ Lending Environment for Homebuyers

LoanDepot’s earnings showed growth in loan originations as interest rates fell, homebuyers looked to refinance, and the housing market has entered what management termed a more normalized environment.

The company returned to profitability for the first time since the fourth quarter of 2022 and introduced a new strategic roadmap.

Company materials noted that loan origination volumes were up 9.5% to $6.6 billion in the September quarter. Revenues were $314 million compared to $265.7 million last year.

CEO Frank Martell said on the conference call with analysts that the loan origination growth has come as the company has focused on “purpose driven lending and first time homebuyers.”

The results on Nov. 5 came in the wake of continued execution on its Vision 2025 program, which had been announced during the summer of 2022, which targeted $375 million to $400 million in annualized cost reductions and a centralized management of loan originations.

Net income in the most recent quarter came to $2.6 million on a GAAP basis, where the loss a year ago had been $34.2 million in the third quarter.

“Over the past three years, Vision 2025 has been our battle plan to both deal with the realities of a significantly smaller market and position the company for long term success,” Martell said.

Debuting Project North Star

The company has now ended Vision 2025 and announced the debut of Project North Star, amid a “more normalized housing market” which the CEO said builds in part on “investments in platforms and solutions that support and ultimately transform our customer’s homeownership journey.”

The company plans to “launch a unique AI-powered relationship management and an engagement platform that allows our customers to optimize their homebuying, selling, equity optimization, and home management experiences,” Martell said.

Among the five pillars announced as part of Project North Star will be a pillar devoted to “building out our low-touch, automated data-driven mortgage loan processing workflow to drive operating leverage,” he said.

Looking out at the mortgage market in general, Martell said that “over the past couple of years, the housing market has experienced challenges that resulted in the lowest volume of existing and overall home sales since 1995.

“The factors that contributed lower home sales, including the persistent lack of housing stock, fueled by chronic underbuilding, the hangover for ultra-low mortgage rates in 2020-2021, and an affordability crisis impacting many first-time homebuyers can only be addressed through a concerted public-private cooperation.”

But, he added, the Mortgage Bankers Association recently forecast 2025 mortgage market volume at $2.3 trillion, up from a 2024’s projected volumes of $1.8 trillion.

“We believe there’s an increasing possibility for an upward trend in housing transactions and mortgage market activities led initially by growing household formation trends and supported by demand for home equity-linked mortgage products,” Martell said.

CFO David Hayes said, “Our multichannel strategy has proven successful in the third quarter by delivering higher year-over-year volume of purchase originations in a supply-constrained market, and a meaningful increase in refinance originations, particularly during the period in the third quarter, where long-term interest rates fell.”

Looking ahead to the fourth quarter, the company expects to see origination volume of between $6 billion to $8 billion.

Investors bid the shares up 7% in after-hours trading on Tuesday.

During the question-and-answer session with analysts, Martell said, “We feel pretty good about our chances of making money. It is a fluid situation, with rates … but I think that we believe fundamentally that there’s pent-up volume.”