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.
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.
Jobless claims were little changed last week, dropping by 2,000, with analysts saying the labor market remains resilient.
During the week ended Saturday (March 8), the number of Americans filing initial claims for unemployment insurance declined to 220,000, down from the previous week’s revised figure of 222,000, the Department of Labor said in a Thursday (March 13) press release.
The four-week moving average increased by 1,500 and was gauged at 226,000, up from the previous week’s revised average of 224,500.
The decrease in initial claims was not expected by analysts. Polls of economists by Bloomberg and Reuters both showed forecasts of 225,000 claims for the week.
Bloomberg reported Thursday that the number of initial claims was similar to those seen before the pandemic and showed that the labor market was remaining resilient, despite trade wars and government cutbacks.
Reuters reported that the number shows the labor “remains on solid ground” and that the decrease reflects a settling after the spike seen in February that was caused by storms and seasonal fluctuations caused by the Presidents Day holiday.
The Department of Labor also reported Thursday that the number of insured unemployment dropped by 27,000 during the week ended March 1. It dropped to 1,870,000, down from the previous week’s level of 1,897,000.
The insured unemployment rate remained at 1.2%, which was unchanged from the previous week.
The states with the greatest decreases in initial claims during the week ended March 1 — Massachusetts, which had 3,885 fewer, and Rhode Island, which had 1,984 fewer — both attributed the decrease to fewer layoffs in the educational services industry.
New York had the biggest increase, with 15,513 more initial claims for unemployment. The state attributed the rise to layoffs in three industries: transportation and warehousing; accommodation and food services; and public administration.
The Conference Board reported Monday (March 10) that its Employment Trends Index (ETI) dropped in February to its lowest level since October. It attributed the decrease to the impact “growing policy uncertainty” was having on business and consumer sentiment.
Challenger, Gray & Christmas said March 6 that February had the highest monthly total of job cuts since July 2020.