LoanDepot’s strategy of leveraging its technology to build partnerships and grow ancillary businesses like title and escrow appears to be bearing fruit — just as dwindling profit margins on a shrinking pool of mortgage refinancings threaten to cut earnings to the bone.

At $26.3 million, loanDepot’s second quarter net income was down sharply from $427.9 million during the first quarter and $648.6 million a year ago. Although mortgage originations were down 17 percent from quarter to quarter, to $34.49 billion, that represented a 64 percent increase from a year ago.

LoanDepot mortgage originations by purpose

Source: Data from loanDepot regulatory filings compiled by Inman.

In fact, loanDepot logged its best quarter ever for purchase loans, financing $10.38 billion in home sales in April, May, and June. That’s up 31 percent from the first quarter of this year, and nearly double the $5.55 billion in purchase loans originated a year ago.

The increase in purchase loan originations demonstrates “the power of loanDepot’s channel diversity,” the company said. LoanDepot’s retail channel is augmented by a network of mortgage brokers, and joint ventures with homebuilders and banks who market loanDepot’s products using the company’s mello technology platform.

LoanDepot mortgage originations by channel

Source: Data from loanDepot regulatory filings compiled by Inman.

During the second quarter of 2021, loanDepot’s partner channel accounted for $6.61 of the company’s loan originations — close to one-fifth of total volume.

The steep drop in earnings was attributed to lower profit margins due to increased competition, particularly in the wholesale partner channel, and higher interest rates that dented refinancing volumes. At 2.28 percent, gain on sale margin was down from 2.98 percent during the first quarter, and less than half the 5.39 percent gain on sale realized during the same quarter a year ago.

On a conference call with investors, the company provided guidance projecting that gain on sale will rebound to somewhere in the neighborhood of 245 to 295 basis points during the third quarter, and that loanDepot expects to originate $30 billion to $36 billion in loans during that time.

“We remain focused on our strategy of offering even more adjacent, non mortgage real estate-related services that will serve our customers through every stage of the home ownership journey,” loanDepot CEO Anthony Hseih said on the call. “Providing our customers with robust choices and an expansive set of products and services through our proprietary technology, powerful data and analytical capabilities, and exceptional service, is how we will continue to win.”

Last week, loanDepot announced it will roll out a “Grand Slam package” offer on Oct. 1, with cash rebates of up to $7,000 on bundled services when clients buy and sell with a mellohome preferred real estate agent, finance with loanDepot, and choose the company’s title insurance services.

Email Matt Carter

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