LoanDepot Is Closing It’s Wholesale Channel After Losing $232 Million In The Second Quarter
LoanDepot CEO Frank Martell
California-based LoanDepot is closing its wholesale division amid plummeting origination volumes. The company is also seeing a widening of it’s financial losses in the second quarter.
The decision to close the channel also reflects fierce competition in the broker space. It’s a sign that larger lenders cannot compete against United Wholesale Mortgage during a recession. UWM was the only lender who saw an increase in sales during the second quarter.
The announcement on Tuesday came alongside a $223.8 million loss in the second quarter of 2022. This is more than double the $91.3 million loss in the first quarter of 2022. A year ago, the company delivered a $26.2 million profit in Q2.
LoanDepot executives said the company plans to fund the remaining wholesale pipeline of approximately $1 billion in loans by the end of October.
The executives clarified the company is exiting the wholesale and non-delegated correspondent channels but will maintain joint ventures with homebuilders and depositaries.
Rate lock volume in the second quarter of 2022 dropped to $19.5 billion. This is down 35% from $30 billion in the previous quarter. The gain-on-sale margin also nosedived to 1.16% in the second quarter. This is down from 1.96% in the previous quarter.
LoanDepot’s loan origination volume overall dropped as well. Total volume fell to $16 billion from the previous quarter. This is a decline of 26%. As a result, LoanDepot’s market share dropped to 2.4%.
LoanDepot Is Closing It’s Wholesale Channel. Does It Have Other Problems?
LoanDepot CEO Frank Martell told the media:
We are not going to chase market share.
Retail originations also dropped from $16.5 billion in the first quarter to $10.8 billion in the second quarter. However, LoanDepot’s joint ventures with homebuilders and depositaries increased from $5 billion in the first quarter to $5.1 billion.
The firm’s total expenses in the second quarter of 2022 fell 7.5% to $560.6 million from the previous quarter. Year over year, expenses dropped 75% from $749 million in the same period in 2021.
LoanDepot has also laid off 4,000 employees since January.
Martell told analysts the company expects to save between $375 million and $400 million during the second half of 2022.
However, unpaid principal balance of the servicing portfolio increased 1.2% to $155.2 billion in the second quarter this year.
LoanDepot also told investors on Tuesday that origination volumes would fall further in the third quarter. The company projects origination volume of only between $5.5 billion and $10.5 billion.
LoanDepot shares closed at $1.84 per share on Tuesday, dropping 4.66% from the previous closing. The firm went public in 2021 at $14 a share.
