LoanDepot Originations Surge 34% on Lower Rates, CEO Says Housing Market ‘Remains Challenged’

LoanDepot’s fourth quarter earnings, released after the markets closed on Tuesday (March 11) indicated double-digit growth loan originations that took advantage of lower interest rates toward the end of 2024, as homebuyers navigated a housing market that company leadership said remains “challenged.”

The company’s earnings materials detailed that loan originations in the latest quarter were $7.2 billion, up 33% from the year ago fourth quarter. Revenues of $257 million were 12.6% higher than the same period last year. The weighted average FICO score of borrowers, according to the company’s investor presentation, stood at 729. The delinquency rate (60-plus days) stood at 1.6% vs. 1% a year ago.

Looking to Project North Star

CEO Frank Martell who, as the company announced earlier this month, is stepping down from the role June 4, said on the conference call with analysts that the return to profitability late last year has set the stage for the leadership transition.

That profitability came in the wake of the firm’s Vision 2025 strategic program (which lasted from 2022 to 2024) that Martell said “will enable loanDepot to emerge from the market downturn a more efficient and durable company.”

The firm is now in the midst of its Project North Star, an initiative that is leveraging artificial intelligence (AI) and product development with an eye on doubling loan originations.

“The housing and mortgage markets remain challenged, no doubt, but they are substantial in size and hold many opportunities for [the company] to grow and to realize the strategic objectives,” Martell said.

CFO David Hayes said that mortgages with “rate lock,” measured in terms of volume, were within guided ranges for the quarter, and the surge in year-over-year originations came as there was, he told analysts, “a pickup in lock activity during the third quarter stemming from a temporary decrease in market rates. This increased lock volume was concentrated in September and therefore resulted in closings during the fourth quarter.”

The company sees $4.5 billion to $5 billion in loan originations for the current quarter. That would imply roughly flat to 11% growth over the year-ago levels.

Shares slipped 10.6% after hours.

During the question-and-answer session with analysts, when asked about the firm’s balance sheet, Hayes said, “We have maintained heightened levels of liquidity considering the challenging mortgage market. And we expect to maintain heightened levels of liquidity over that period.”

Asked about Project North Star, management said on the call that the initiative is in its formative stages, but the firm is investing in tech platforms that will reduce loan cycle times and improve the customer experience.

Jeff Walsh, president of the firm’s LDI Mortgage operations, said, “We’re actively onboarding our partnership with [homebuilder] Smith Douglas and with Onx Homes … and also looking for additional opportunities in that space aggressively.”

The pact with Smith Douglas, through a joint venture, has created Ridgeland Mortgage, which offers streamlined financing options for new homebuyers in the Southeast. The announcement with Onx, debuted a joint venture that offers a digital financing option for new homebuyers in Florida and Texas.