Mortgage

LoanDepot profits surge in Q3 as margins rebound

CEO Anthony Hsieh says $20M reduction in personnel expenses stem partly from “redesign of compensation”

Anthony Hsieh
Anthony Hsieh, founder and CEO of loandepot

Nonbank heavyweight loanDepot reported strong results in the third quarter of 2021, with the lender growing its market share to 3.5%.

Anthony Hsieh, founder and CEO of loanDepot, said that the results are “just a preview of what is to come.”

According to loanDepot’s quarterly earnings report released on Monday, net income jumped to $154.3 million compared to $26.3 million in the second quarter.

The growth was fueled by the lender’s gain-on-sale margins rising to 2.84% from 2.28% the previous quarter. The lender also said in their earnings report that the quarter -over-quarter increase was driven by a rise in rate lock volume and a $20 million decrease in personnel expenses.

Hsieh noted that the dip in personnel expenses stemmed from “initiatives that began in the second quarter” including a “redesign of compensation.”

Meanwhile, origination volume for the multichannel lender was $32 billion in the third quarter, dipping by $2.5 billion from the second quarter.

The 7% decline was a result of lower refi volume, which amounted to $21 billion from July to September, compared to $24 billion in the second quarter. On the other hand, purchase origination increased to $11 billion from $10.4 billion in the previous quarter.

In order to keep origination volume elevated, the Orange County, California-based mortgage shop increased its marketing and advertising expenses to $132 million in the third quarter, up from $114 million the previous quarter.

Year-over-year, the amount allocated to marketing has more than doubled, leading to a 16% increase in unique visitors, the lender said.

Looking ahead, the nonbank said that the “dynamics on GOS continue to evolve and be volatile” and that for the fourth quarter “GOS is trending lower, which is not unexpected.”

loanDepot also noted that the industry “is moving towards consolidation of service providers for products and servicers for the homeowner.”

“The loanDepot Grand Slam is paving the way towards this consolidation with early success in the form of substantial increases in purchase lead volume, real estate agent introductions, and real estate listings,” said the company’s CEO. “We won’t stop there; we’re already planning to offer additional products and services for the benefit of our customers.”

In July, loanDepot’s real estate-agent-geared subsidiary, mellohome, announced that it will offer cash rebates of up to $7,000 on bundled services when clients buy and sell with a mellohome-connected real estate agent, finance with loanDepot and use one of the company’s title insurance companies.

In recent months the mortgage shop has been embroiled in a lawsuit filed by former executive Tammy Richards, who accused the lender of cutting corners during the underwriting process to drum up more business before the company’s initial public offering earlier in the year.

The lawsuit filed by Richards also includes multiple allegations that male company executives created and enforced a “misogynistic frat house culture” that routinely led to women being harassed and demeaned. 

During the company’s earnings call, the lawsuit was briefly mentioned, with the lender noting that they have “ethical, responsible business practices” with “procedures that require all loans to be closed subject to proper documentation.”

“We will defend ourselves…we will prevail,” the lender said.

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