loanDepot achieved profitability in the third quarter of 2024, ending an 11-quarter streak of financial losses. Cost reductions and revenue growth drove this turnaround amid lower interest rates, which boosted refinancing activity.
As a result, loanDepot is retiring its Vision 2025 strategic plan, which began in July 2022 to help the company reduce its non-volume expenses by more than $730 million.
Vision 2025 will be replaced by a program called Project North Star that is focused on the homeownership journey. It has an emphasis on first-time homebuyers; purchase loans through an expanded geographic footprint and partnerships; servicing portfolio scale and retention; operating leverage quality to drive down turn times; and recruiting, developing and retaining the best talent available.
“The launch of Project North Star builds on the strategic pillars of Vision 2025, including our focus on durable revenue growth, positive operating leverage, productivity, and investments in platforms and solutions that support our customer’s homeownership journey,” loanDepot president and CEO Frank Martell said in a statement.
On Tuesday, California-based loanDepot reported a non-GAAP adjusted net income of $7 million for Q3 2024, compared to a $15.9 million loss in Q2 2024 and a $29.2 million loss in Q3 2023. By GAAP accounting standards, the net income in Q3 2024 was $2.6 million.
Chief financial officer David Hayes said in a statement that in the third quarter, there was a “modest improvement in the mortgage market, coupled with the company’s positive operating leverage,” which fueled the return to profitability.
“As we look toward 2025, we anticipate continued market challenges, but we believe that the implementation of Project North Star will allow us to capture the benefit of higher market volumes while we continue to capitalize on our ongoing investments in operational efficiency to achieve sustainable profitability in a wide variety of operating environments,” Hayes said.
As an example of initiatives included in the new plan, the lender announced this week a joint venture agreement with Smith Douglas Homes, a top 50 homebuilder with a solid book of business in Southern states. During an earnings call, executives told analysts that loanDepot is seeking more JVs with builders, real estate brokerages and retail lenders across the country.
According to filings with the Securities and Exchange Commission (SEC), loanDepot’s expenses in the third quarter were $311 million, down 9% quarter over quarter and up 1.9% year over year. The increase was primarily due to higher commissions, direct origination expenses, and marketing and overtime, reflecting the increase in volume.
Costs may increase as the company continues to add loan officers and operations team members. The company expects vendor costs to rise in 2025, just as they did in 2023 and 2024.
Meanwhile, the company’s total revenues reached $314.6 million in Q3 2024, an increase of more than 18% on both a quarterly and yearly basis.
Operational biz
loanDepot returned to profitability while increasing its mortgage production and volume. Origination volume was $6.7 billion from July to September, at the high end of investor guidance and up from $6 billion in the prior quarter. Its pull-through gain-on-sale margin was 3.29% in Q3 2024, compared to 3.22% in Q2 2024.
In August, loanDepot added a first-lien home equity line of credit (HELOC) to its product suite, enabling homeowners without a mortgage to borrow from their home equity. In September, it hired military advocate Bryan Bergjans to boost its lending capacity in the U.S. Department of Veterans Affairs (VA) space.
Purchase loans comprised 66% of loanDepot’s total volume in Q3 2024, down from 71% in the same period in 2023. Meanwhile, the company’s organic refinance consumer-direct recapture rate was 71%, up from 69% a year ago.
Regarding loanDepot’s servicing portfolio, the unpaid principal balance (UPB) increased to $114.9 billion on Sept. 30, compared to $114.3 billion on June 30. Servicing fee income decreased to $124 million in Q3 2024, compared to $125 million in the previous quarter.
Company executives project a fourth-quarter 2024 origination volume of $6 billion to $8 billion. The pull-through gain-on-sale margin is expected to be between 2.85% and 3.05%. loanDepot ended the quarter with $480 million in cash.
Looking forward at the Mortgage Bankers Association’s expectation of $2.3 trillion in industrywide origination volume for 2025, Martell said, “We feel pretty good about our chances of making money,” adding that “it’s a fluid situation with rates.”
After the earnings release, loanDepot stock was trading at $2.35, up 9.3% in after-market hours.
