loanDepot hit with $91.3 million net loss

What lies ahead may be even uglier

loanDepot hit with $91.3 million net loss

Higher rates and shrinking originations have dealt a blow to loanDepot, which reported a $91.3 million net loss for the first quarter of 2022.

The Foothill Ranch, Calif.-based lender/servicer originated $21.6 billion of loans (weighted toward refinances) in Q1 – a sequential decrease of 25.8% or $7.5 billion. loanDepot said its market share decreased to 3.1% due to the "intense competitive pressure from decreasing origination volume."

Its total quarterly revenue came in at $503.3 million, which the company said reflected lower rate lock volume ($19.8 billion) and lower gain on sale margins (196 bps), partially offset by a 13% reduction in total expenses.

"Our results reflected the sharp and rapid increase in market interest rates, which led to significantly lower profit margins during the latter half of the quarter," loanDepot founder and executive chairman Anthony Hsieh explained. "While we made progress toward our goal of reducing the expense base to align with earlier expectations, our volumes have continued to decline, and expense reductions have not kept pace with the rapidly changing environment."

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Unlike its rival, United Wholesale Mortgage, loanDepot has no mortgage servicing markups to fall back on. UWM posted a $172 million increase in the asset value of its MSRs during the first quarter. loanDepot, on the other hand, saw a net loss of $68.4 million in the fair value of its servicing rights, bringing its MSR portfolio to $153.4 billion of unpaid principal balance.

Frank Martell, who was recently brought in to lead the nonbank as president and CEO, said he recognizes that there are "short-term [market] challenges" that will have "adverse impacts" on the company's profitability in the near term.

loanDepot expects its origination volume to slide further in the second quarter, landing somewhere between $13 billion and $18 billion. The lender forecasted its Q2 gain on sale margin to hover between 160 bps and 210 bps.

"We have made and will continue to make progress on reducing our expenses to reflect our new expectations for industry volume. As part of that plan and as part of our balance sheet and capital management strategies, we are suspending our regular quarterly dividend for the foreseeable future," Martell said. "Moving forward, we will remain laser-focused on profitable revenue growth and driving for best-in-class operating leverage to create long-term shareholder value creation."