loanDepot CEO talks ‘longer and tougher’ mortgage cycle, NAR settlement and cyberattacks 

The Gathering: Frank Martell said small rate cuts won't cure the current market decline

loanDepot CEO Frank Martell expects the current mortgage market cycle to be “longer and tougher than anybody expected.” Adding to this challenge, lenders must deal with an increased risk of cyberattacks, something that loanDepot itself experienced earlier this year. 

“At least around loanDepot, people were doing high 5s [30-year fixed mortgage rates] in the fourth quarter of last year, thinking rates were to come down, and things were going to take off. That’s kind of evaporated,” Martell said on Tuesday morning in a session during The Gathering, HousingWire’s real estate and mortgage conference held in Scottsdale, Arizona. 

According to Martell, the mortgage market’s origination volume totaled $4 trillion in both 2020 and 2021, and “unfortunately” the decline in loan production “is not going to be cured by a 50-basis-point reduction” in mortgage rates.  

Martell said that when the mortgage market meltdown happened in 2022, the company set a plan that included simplifying the organizational structure, focusing on client service and quality, automation and operating leverage. With a higher-for-longer landscape, however, the expectation is that the plan’s goals may take longer to be achieved. 

“On the cost side, obviously, we’re tightening our belts,” Martell said.

loanDepot recorded a non-GAAP adjusted net loss of $142.4 million in 2023, smaller than its $457.6 million loss in 2022. The lender announced a $120 million cost reduction program that will positively impact this year’s financial results, Martell added. 

Amid a higher rate environment when refinances are scarce, Martell said that loanDepot sees opportunities in other products, such as renovation loans and home equity lines of credit (HELOCs). The company now has a digital HELOC offering.  

In the purchase space, Martell said that real estate agents are the company’s “biggest source” of leads and are all “trying to figure out” what the NAR settlement will mean for the market. Judge Stephen R. Bough, who oversaw the Sitzer/Burnett lawsuit, granted preliminary approval to NAR’s settlement on Tuesday. 

Martell believes there will not be “a zero commission” market. Rather, commissions will be something for the buyer or seller to take on because there’s a “value” in a buyer-side real estate agent’s work. 

Technology’s role

Martell sees the industry advancing in terms of technology, with opportunities for artificial intelligence (AI) to improve operational effectiveness and quality management.

AI will help areas like the call center, product development and underwriting so lenders can make “better decisions quicker,” he said.

One threat, however, remains in cyberattacks. Martell calls for partnerships between the public and private sectors to deal with them.

loanDepot entered 2024 by dealing with a cyberattack that brought down its systems. As a result, the lender has taken a $30 million hit in its earnings, he said.

“We were fortunate we have very sophisticated systems, so we knew within an hour,” Martell said. “We were down for about seven days, and that’s a lot of pressure to try to keep your pipeline going. Speed is critical. The speed at which you can recover gives you leverage.”

Martell said that two groups of attackers — one from Russia and one from the U.S. — were working together as “organized crime” with “a lot of money, a lot of smart people.”

“The government is disrupting some of their sites, but we need more of that. We need to keep them on the defensive because right now, they’re on the offensive,” Martell said. “I would encourage everybody to have a backup recovery plan and a business continuity plan, because that saved us a lot of agony.

“For every CEO or company, [it’s] an existential issue.”

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