National mortgage lender loanDepot reported second-quarter earnings last week, highlighting a sharp narrowing of its quarterly loss and continued expansion into home equity lending.
But the company’s accompanying regulatory disclosures — including a 690-page 10-Q filing — offered additional insight into how loanDepot is navigating the difficult housing and mortgage market, including new details about its home equity strategy, efforts to address upcoming debt maturities and changes to executive compensation.
Here are three takeaways from the company’s latest earnings disclosures.
Home equity takes a bigger role in loanDepot’s strategy
According to the latest results, loanDepot substantially narrowed its losses during the second quarter as the company leaned further into home equity lending. The lender reported a net loss of $6.6 million during the quarter, compared with a $54.9 million loss during the first three months of the year. Revenue increased 18 percent sequentially to $337.3 million, while loan origination volume rose 4 percent to nearly $8 billion.
Unit volume, meanwhile, increased 25 percent from the first quarter, growth loanDepot attributed in part to its expansion into home equity lending through its expedited 5X5 HomeLoan product. The company said home equity loans tend to be less sensitive to mortgage rate swings and seasonal changes than traditional purchase and refinance lending and can carry higher revenue and lower production costs despite smaller loan balances.
CEO Anthony Hsieh framed the strategy as a way to tap into the roughly $35 trillion in equity held by U.S. homeowners, particularly borrowers who may be reluctant to refinance and give up lower first-mortgage rates. The company also continued growing its purchase business, saying purchase loans accounted for 57 percent of second quarter originations, up from 41 percent during the first quarter.
LoanDepot steps up efforts to address its debt
The filings also provided additional detail on loanDepot’s efforts to manage debt coming due in 2027 and 2028. The company repurchased $16 million of senior notes during the second quarter and another $26.6 million after the quarter ended through July 30.
At the end of June, loanDepot had about $824 million in senior notes due in 2027 and 2028. The July purchases were made below face value, particularly for the debt due in 2028. LoanDepot paid about 84 cents on the dollar to retire $21.4 million of those notes, while paying roughly 93 cents on the dollar for another $5.2 million of debt due in 2027.
Management said addressing the bond maturities remains a priority and that loanDepot has retained financial advisers as it evaluates ways to optimize its capital structure. The company has not said which options it is considering or whether it favors additional repurchases, refinancing, an exchange or another approach. LoanDepot declined to provide additional detail when asked by Inman about its plans, pointing instead to the public filings.
The company is also raising liquidity through its servicing portfolio. In July, loanDepot entered into an agreement to sell servicing rights on loans with an unpaid principal balance of $9.7 billion, with the transaction expected to settle during the third quarter.
A loanDepot spokesperson told Inman that an earlier investor presentation incorrectly listed the portfolio at $12 billion. The presentation has since been corrected to $10 billion, which the company said is a rounded version of the $9.7 billion figure disclosed in the 10-Q.
Executive stock awards ditch stock price hurdles
LoanDepot’s filings also revealed changes to equity awards held by several senior executives. On Aug. 5, the compensation committee amended performance restricted stock units granted March 16, replacing stock-price-based vesting conditions with time-based restricted stock units that vest based on continued service.
The changes affected nearly 1.2 million performance stock units (PSUs) held by five executives, according to Form 4 filings reviewed by Inman.
Of those, 518,867 were held by CFO David Hayes, 393,081 by Chief Digital Officer Dominick Marchetti, 157,232 by Chief Investment Officer Jeffrey DerGurahian, 102,201 by Chief Legal and Risk Officer Joseph Grassi III and 23,584 by Chief Accounting Officer Darren Graeler. The awards were replaced one-for-one with restricted stock units (RSUs) that vest in three equal annual installments beginning March 16, 2027.
At the same meeting, the compensation committee also approved terms for an additional 2.5 million RSUs for four executives. Hayes, Marchetti and DerGurahian were each approved for 750,000 additional units, while Grassi was approved for 250,000. Those awards are expected to be formally granted Sept. 15 and vest over two years.
A loanDepot spokesperson declined to explain why the committee removed the stock price hurdles or approved the additional awards, telling Inman the company would not comment beyond its public filings.
