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More layoffs are in store at loanDepot, but not at the same scale as a year ago, as company executives warned that they expect next year to be just as tough as 2023 for mortgage lenders.

The Irvine, California-based mortgage lender announced Tuesday that it managed to trim its net loss for a third consecutive quarter and keep plenty of cash on hand despite a slight drop in mortgage originations and revenue from Q2 to Q3. LoanDepot reduced its Q3 net loss by 31 percent from the previous quarter to $34 million, even as revenue contracted by 2 percent from Q2 to $266 million.

Expenses were down 8 percent from Q2 to Q3, to $305 million, as loanDepot continued to execute its “Vision 2025” plan to cut costs and rebuild its business in a high-rate environment. Cost reductions helped the company maintain a cash balance of $717 million as of Sept. 30, down by just $2 million from June 30.

LoanDepot began 2022 with 11,300 employees and has since shed nearly 7,000 workers through layoffs and attrition. After trimming about 400 positions during the first three months of this year, loanDepot cut the payroll by approximately 150 positions in Q2 and by the same amount in Q3, leaving the company with 4,532 workers as of Sept. 30.

But on a call with investment analysts, CEO Frank Martell said loanDepot plans to trim another $120 million in annual expenses, including $100 million of “non-volume related reductions.”

Looking forward to next year, “our current expectation is that the market volumes will remain substantially similar to 2023 levels,” Martell said. “I believe that the factors that have impacted the industry in 2023, including lack of housing stock for sale, as well as record low affordability will be with us during 2024.”

Chief Financial Officer David Hayes said the latest cost-cutting plan “is already in place and we expect to achieve most of our run rate savings by the end of the first quarter of 2024.”

While he did not provide specifics on the number of employees who will be affected, Hayes said the “majority of the plan savings consists of non-headcount related reductions, including vendor contract terminations and renegotiation, optimized marketing spend, lower corporate real estate costs as well as other savings across other expense categories.”

The rest of the savings will be “FTE [full-time equivalent employee] and organization related,” Hayes said.

Martell said that in addition to cost cutting, loanDepot also benefited in Q3 by growing the company’s servicing platform, builder partnerships, and home equity lending.

Frank Martell

“We continue to aggressively reset our cost structure to address the impact of generationally low unit volumes as we maintain our focused execution of Vision 2025, including capturing opportunities to expand purpose-driven lending in support of the increasingly diverse communities of first-time homebuyers,” Martell said in a statement. “We believe our proven diversified channel strategy, highly talented team, operating scale, and ongoing cost productivity program will position us well to capitalize on the eventual recovery of the housing market.”

Last month loanDepot launched a new “accessZERO” program that provides a second mortgage to cover the minimum down payment requirement on FHA purchase mortgages.

“Since the launch of vision 2025 in the second quarter of last year, we have reduced our total quarterly expenses by approximately 45 percent,” Martell said on Tuesday’s earnings call. “It’s important to note that in addition to becoming more efficient, we are also making investments in the company to position us for leadership as the market emerges from the current downturn. These investments include our primary point of sale and loan production systems, as well as customer contact and management capabilities.”

Shares in loanDepot, which in the last year have traded for as little as $1.14 and as much as $3.02, closed at $1.43 before Tuesday’s earnings release, and were little changed in after-hours trading.

LoanDepot purchase originations continue to shrink

Source: loanDepot investor reports.

At $4.34 billion, loanDepot’s Q3 purchase mortgage originations were down 5 percent from Q2 and 37 percent from a year ago. Refinancing volume was up 2 percent from the previous quarter, to $1.75 billion, thanks to a 3 percent increase in cash-out refinancings, which totaled $1.66 billion.

Company executives said they expect Q4 mortgage originations to total between $4 billion and $6 billion.

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Email Matt Carter

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