loanDepot Budget Cuts Aren’t Stopping Hemorrhaging Losses As Company Sees 38% Loss In Revenue For 4th Quarter
loanDepot budget cuts and significant expense reductions don’t seem to be working. The lender keeps lost money even after exiting the wholesale channel and cutting thousands of jobs. loanDepot reported heavy losses for both the fourth quarter of 2022 and the full year.
The company reported a net loss in the fourth quarter of $157.8 million. This is nearly 15% worse than the loss of $137.5 million it reported in the previous quarter.
It was the company’s third consecutive quarterly loss.
loanDepot reported a net loss of $610.4 million for 2022. This compared to a net profit of $623.2 million for 2021.
The company’s losses came as quarterly revenue fell to $169.7 million. This is down 38% from the third quarter and full-year revenue falling to $1.3 billion from 2021. That was primarily due to declines in loan origination volumes. loanDepot saw a 35% drop from the third quarter to $6.4 billion, and a 61% year-over year decline to $53.8 billion.
loanDepot Budget Cuts Didn’t Stop The Hemorrhaging
loanDepot noted that its purchase loan origination volume increased to 70% in the previous quarter. It also jumped 34% of total loans in the fourth quarter of 2021.
The growth in purchase originations, however, also reflected the steep drop in refinancing loans that occurred as mortgage rates rose sharply during 2022. loanDepot’s cash-out refinancing volume in the fourth quarter totaled $1.4 billion, down 46.6% from the third quarter, while rate/term refinancing totaled $86.4 million, down 44.6% from the previous quarter.
For the year, combined refis totaled $24.4 billion, down 75% from $97.7 billion a year earlier.
loanDepot stated the company reduced its total expenses by 36% from Dec. 31, 2021, to Dec. 31, 2022.
The company also announced in August that it had made the “strategic decision” to exit the wholesale business.
When Will loanDepot Be Back To Break-even?
loanDepot CFO Patrick Flanagan believes loanDepot entered 2023 financially sound. The company started 2023 with $921 million of tangible equity and $864 million of unrestricted cash.
loanDepot CEO Frank Martell could answere if the company will break even 2023. Martell said:
I don’t think we have a certain answer. I don’t think anybody does. As I said in my prepared remarks, we’re prepared to adjust our planning depending on market conditions. We’re hopeful we’ll see a solid uptick in the selling season into the spring. If that doesn’t materialize, we’ll be looking at continued cost-management activity.
He added, “It’s certainly the roughest market in a generation, for sure. But I think we have the liquidity, and we have a very sound and prudent capital management strategy that will see us through the cycle.”