loanDepot (LDI) 9 Nov 222022 Q3 Earnings call transcript

Good afternoon and welcome everyone to loanDepot's Third Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Sir, please go ahead.

thank joining and call. everyone, afternoon, you our for Good loanDepot. Relations I'm Investor at Gerhard Erdelji, Officer Today, loanDepot’s will we discuss results. third quarter XXXX

risks in this website forward-looking filings our a the Events well operational Investor be On the that Before financial to could other tab. or Factors through forward-looking and your volume, an weighted Chief statements performance guidance to our company's of through Martell Risk our questions. to origination to statements from Presentations be like These sections volume, future transcript periods. call deemed lock statements factors are due I will fact and the the other webcast of future investors.loandepot.com company's that in are the under begin, than statements regarding to Frank Officer, on Officer, and today's pull of SEC. A Chief conference Actual with and posted call forward-looking quarter, may at have and and these margin but on not loanDepot limited materially are for described Financial statements remind operating gain-on-sale weighted pull statements, Executive company's may our as historical Flanagan expenses. of financial and to available and call including overview results, Patrick provide outlook President All we the rate as this differ and results periods include answer we based current Relations information. everyone would statements that expectations

us Jeff you remarks. turn Frank. with have DerGurahian address Officer, questions after our and get to our I'll started. by joined Walsh Chief might are We Markets Capital that, over to any Jeff LDI help President, Frank to things prepared And mortgage also

fronts on strategic Gerhard. has executed previously the I quarter as outlook. significant loanDepot progress over conditions, we sharing On Vision on team The today's look against made and program. market XXXX perspectives you, results the call many past to my forward our our our Thank announced

for finally, Vision recall, optimizing driven focuses year in may in transforming XXXX purpose launching to made this my And four our purchase emphasis current for rightsizing relates expanded launched four pillar. on you anticipated additional progress investing which significant remarks. growth context covers one digital his for will with an business our losses the market two number drive focus pillars. announced Vision solution. substantially our each cost on goals today against with targets originations organizational to opting line focuses three structure. prepared have narrowed profitable sets lending. HELOC structure the pillar XXXX we money line I formerly on we Pillar we of will transactions our during our innovative on related operating remarks quarter previously financial third has Pillar our and XXXX. Vision achieve initiatives, in As In provide internally balance and aggressively first July generating calls Pat and which Pillar with conditions to performance. in quartile metrics

quarter third and in lowered aggressively the wholesale party net expenses of as exited quarter was the channel. million $XXX second $XXX we third Our the in internal from loss and million down

seasonal than decline as discuss will fourth we the benefits actions expect activity we this our flow during we later, quarter. cost which already realize planned quarter new actions as loss quarter in million of offset expected revenues. through bit the opening as $XXX narrow a the taken, fourth Despite million dip XX%, XX% to a by well continue more the to in housing as For in reduced or our $XX sequential base or Pat

for believe million plan we will half reduction expense size in in expense we're With some to market approximate pace annual on our XXXX we XXXX. goal Vision a reduction committed our we $XXX for built market, remain meet of to time, to conditions $X.X likely second which company trillion challenged plan, the the of XXXX. our mortgage for As an appropriately

HELOC to also contributor launch equity. generating been fit digital profitable XXXX. our half meaningful aggressive XXXX. footprint outlined in hard to access a of I we've unique with pleased our strategic revenue launch home the confirm commenced addition HELOC announced reduction, will at an In in with I'm markets on digital have solution we that their This in customers cost XXXX. this second be HELOC important of the the which we digital solution work Vision May to In progressive in that expected imperatives opportunities would across several believe year to months. our rollout revenues our provides attractive we coming a in We solution option a

us as solution preserving first low while rate homeowners their rates seven contains access readymade servicing With many customers. to cases days, low high, way fast, the an to equity interest value many and mortgage. those cash home greatly today, their an our growing a would in some interest opportunity all-time at Synergistically, with benefit fast providing easy as historically with provide to in-house borrowers portfolio on a HELOC from

innovative, our and diversify revenue organization that profitable benefit advancing our our our driven adding launch to capabilities and revenues services outstanding of at of HELOC, puts launch our technology us an of generation position The more by our homeowners. important HELOC also digital generate sophisticated reinforces trusted help to will Our network commitment backed roots. brand officers, and our the digital The is products step HELOC of national lead loan being consumer an an customers, growth. in strength licensed in goal continue

launch, and stated will that specializing underserved to partnership important our goal communities. are a HELOC family goal Georgia we making is against with lending based of driven our loanDepots a recent also NHC advance HomeCorp., venture origination providing of our affordable our homebuilder to building We purpose addition National stated venture demonstration credit XXth we progress In this Together our in One is homes. partnership. increasing single launched which Mortgage purpose driven joint business. believe

customers business to in and continue channel. generates venture and differentiated channel this invest quality going high Our is that aggressively to are unique a we joint

lower In delivery, addition our loanDepot returning in higher growth our we virtually to process at servicing of onto and all and profitability, recently risk management important completed compliance quality, of of satisfaction the to run is significant portfolios expected In rate regard, platform, bringing customer investments to also levels our is and profitable a which loan driving cost. in-house making capabilities. this drive

resulted loanDepot help structure markets the effectiveness also and Against to as company. of have the and of quality our Officer, our operating In reset increase support. narrowing our initiatives. our our already Risk addition, compliance and Smallwood want important the stakeholders professional Both management a Chief and period the thanking of change as a challenging which continue months experience very for team marks housing as of optimize additions our structure, for Grassi one doubt, cost my significantly progress and most to that our losses. a has substantial six in organizational but and in executives backdrop conclude the we to to added generation, are prepared The key of Gregory their I challenging their they've past been our today been other no have Chief team. valuable senior we Legal Joe Officer remarks by have industry extensive making

far market shifted so have purchase cost and profile With the rate financial you We an launched billion now in approximately Flanagan, detail. towards results we and navigate run aggressively in new our this next. also digital our turn vectors and that, innovative are will in JV. take our over we more identified play, positioned of through reductions HELOC With believe call growth developed to revenue million cash-on-hand, downturn transactions, XXth Pat to year the through solution increasingly $X.XX I'll $XXX several who

good Frank, afternoon, Thanks, and everyone.

loan we of quarter $XX.X from was of that was origination guidance last volume of $X.X issued quarter near end second During between high decrease billion the the of XX% $XX the This billion. a billion, XXXX. quarter the and third

billion refinance $X loan originations, Third consisted cash in and refinances. purchase loan primarily out $X in quarter of volume originations billion

Our XX% third year rate XX% cash total transactions same products the purchase period. of emphasize from less the an from as and increase quarter, strategy in as the well to a out in interest XX% during to mortgage sensitive has transactions increasing to the ago in proportion resulted purchase XX%

X.X% rate million, lock to guidance quarter came through XXX $XXX year during in weighted decrease the a resulted revenue in billion quarter by billion decrease the interest mortgage Our volume which points rates. lower of $X.X represented of of also lock billion. volatile quarter. increased to quarter The volume of for the second third third result within from pull XX% last between Rate basis driven the The volume total issued average XX $XX.X we increasingly revenue $X from an rate X.X%. is in

the at average rate For X.X%. context, we mortgage XXXX began with

Our gain-on-sale we quarter pull the also for within provided. basis guidance third points, weighted through in came at the margin XXX

to unpaid quarter. $XXX XX, XX, $XXX during of in to was balances The September key portfolio sale billion of to due principal our as balance servicing billion primarily now unpaid retention focus. of XXXX. This of customer servicing $XX revenue Turning of and decrease June diversification areas portfolio, XXXX the the decreased remain our to as billion compared

customers achieving at of our of to goal our anticipate year. and we our before the quarter, substantially bring Mae expenses. better the to of with continue As our agency the quarter, all the to can our of compared in-house end our third lower homeownership of and infrastructure and we scalable house throughout directly second in serviced needs for XX% of servicing highly this in-house leveraging Ginnie end all the portfolio the entire additional engage end products business, journey, By services their the for

strategy quarter rate full We As the our the from XXXX in operations. environment in value We the in million $XXX in so portfolio, our we XXXX. volatility result quarter million servicing in rising results of earnings income fee second of a a against and increase the liquidity. portfolio, decreased of the our this not to fair of the do believe third of servicing record impact protects $XXX smaller hedge in

portfolio hedging potential the servicing the to strategy portfolio rising hedge we defaults against our Our positions protected in servicing dynamic in rate reaction our is well is and adjust interest We marketplace. environments. believe for changing

average delinquency average lower average loan reliable As the was and believe These rates the origination in improved XXXX of over expectations generate times. for and result base operating our was revenue performance uncertain economic with we A volume, in our Vision a time. expense will our plan financial to XX leverage major low XX%. create the amount should was component of XXX,XXX; origination during these months; only weighted age was align to October, result efficiencies FICO and XXX, value of loan default weighted the average the characteristics and and at end was loan

As much and shrinking we that market Frank for total mortgage believe $X.X smaller approximately will our we've expense market. the been said, and this trillion XXXX base

million based the XX% of expenses expenses. marketing prior primarily and personnel for reducing commissions more decreased The expenses by our or XXXX third lower offset total Our by demonstrating revenues, significantly plan lower lower quarter, expenses, quarter from quarter-over-quarter. driven success Vision including salaries as both $XXX lower and the volume is than XXXX loss

the expenses. reduction expense direct million commissions quarter included the of origination form related expenses volume for non-volume of savings related $XX total of and Our expense lower in million $XX and

the reduce goals $XXX was expenses second the annualized million to for by XXXX related plan an of to $XXX of half million the XXXX. One Vision of non-volume

Based analyzed million $XXX million end expect identified, quarter. already at the or $XXX we reductions XXXX. rate realized taken actions have of of expense to have that XX% or least have by during the the we achieve We on run

$XX million of including in The second third $XX quarter fees. Vision Vision million, lease totaling of total and $X charges, million of expenses and Vision related million of XXXX charges professional incurred asset quarter XXXX included $X million. related XXXX $XX impairment charges XXXX service the severance

charges. fourth We in XXXX expect least $XX quarter, additional Vision asset personnel charges at incur related and impairment including million to of the related

the headcount our at aggressively reducing party size at the other reduce of reducing X,XXX. of our third approximately below stated the to quarter, of estate functions our approximately consolidating X,XXX third We cost achieve year appropriately We for and further costs mortgage plan redundant expenditures, expectations to market. smaller We our continue the from well company to operational reduced real cost XX,XXX goal XXXX marketing by charges. end our structure headcount, and goal end reduction to

our of loss. of we fourth market our excellent quarter in additional aspects is narrow agencies the liquidity in We to also of continues tangible continue $X.X over evaluate being $X.X to all reduce with our cash evolve. believe are for expense the potential The business continuing XXXX the executed against to a believe what we'll on investors. strong Based with the continue our balance as plan that to reductions expenses other ample we backdrop of and unrestricted and of billion sheet financing the of equity, support billion partners, projections, relationships

expect ahead fourth volume $X and billion we quarter, origination the Looking of to $X people. between billion

We and expect lost the between on $X wages conditions billion billion volume market pull in $X current demand. reflecting through of seasonality weighing and

margin quarter operator pull contribution to between to fourth for wholesale and XXX weighted margin ready the that, basis With back from through questions. expect gain-on-sale products. turn we're points impact to increase our exiting XXX reflecting the We higher and the to from over Operator?

line with Instructions] of [Operator Doug Suisse. Harter from you. comes question Credit Thank Your the first

line Your open. is

thinking past You quarters. you that, about MSR great. downs? could us sales be Just are and cash the you Thanks. if talk couple going Can it know forward? you you thinking you of pay would for debt on your that are built up outlook about How about How update liquidity?

Sure, thanks Doug.

are have sales selling any structure. us not we forward. – position very and to we're really invest profitability, going origination think capital noted, of believe that of quarter. take remain of optimize the and we maintain XXXX to of helpful At lot is allows amount of bulk fourth and point and of pillars an at return We a the As work optionality to allow a through also opportunity that advantage in resizing and and both as you exceptional the retention the in invest appropriate know present we the the MSRs strong us mix and liquidity company us of to time which the this servicing think we it we anticipating that to vision the any in the market opportunities continue liquidity

of work of notes? know look unsecured repurchase you as trying And mentioned, as the you about the to you structure, some sort thoughts capital to on any outstanding

you for know manage sheet. the remains of to us a opportunity as an lot That us option said. I for balance There's

the right You know a do liquidity but substantial liability the work we as in of a restructuring, always the management through the the are at sheet. very right, we – look maintaining of side we focused you we'll the amount construct on take of as balance know

Okay, thank you.

James Morgan Faucette next Stanley. from the question comes Your line [Operator Instructions] of with

Your line is open.

my James. Netter questions. for Blake is this line Hi, on the Thanks for taking

for So know pretty year fixed of there new your is originations spreads HELOC that all today would demand originate wondering more? ago. can what ability have you to What been much with for investors you and starting product, our do? off And tighten, if looking spreads how do HELOC volumes income as is, kind decent you increase some a relative to I'm think

Walsh. Jeff Hi! This is

and mortgage significant of from kind know we through just leads opportunity You know general. see factors, as what couple we a on in the origination market purchased spent based HELOC in first on XXXX of dollars far our a as of already as sizing

of in in it see but always we significant opportunity as XXXX. So a of help course, narrowing volume, terms yeah would do

behind Got that? think some next, It wondering of then and during the your you MSR looks about it, And filter of drivers like portfolio, can how about rising you we had negative looking the rates. sensitivity just quarter at talk I'm a your if fair servicing value the mark thanks. should

can Jeff, you get it?

is Yeah. Jeff This DerGurahian.

the add that's book. the able game the age you levels return moves with the coupon so be of and rates, to and price now current to I know at there's not the and rate a terms rise more the originations of think of portfolio, You we until of to in right the going rates sensitivity know moves and are given in lot given for portfolio a

it! you. Got Thank

a fourth And I not think fair quarter, the there’s a markup the markdown. in in value

Okay, thanks for the clarity.

– I’m sorry, quarter. excuse in quarter third third in me, the the

final of with Your Securities. Cranston the from question Trevor line comes JMP

Your line is open.

Hey, question on follow-up thanks. HELOC opportunity. A the

the was of today, Thanks. And most cash guess out that that refi refi your give said of product? of sort come that sort to have cash know in could I moves bringing would expect you likely be kind should think of you HELOC any that, about a towards do I volume of newer of you second guess volume you where to you of as HELOC rates about on? we you out. part you over us sort know moved where sticky that mortgage margins product business You of as think potentially know or XX% XQ sense was I and in to as the roughly expect start up

It materially first a is standpoint be similar although We customer impacted and different HELOC. customer, to credit from don't expect by the business mortgage others. a a

So the know This significant a there's market, in cash-out as you refinance. still HELOC. is opportunity as well for

missing HELOC see we that know the in market opportunity today. that we have You we're

So okay. we know you might as – know there first a small out terms see pattern, margins it our that's in significant so of We that well of don't impact amount. exclusive it mortgage business,

and on that’s we're the out. generally marketing at the on early we as conversion focusing that overall mostly and to on margins looking gain due wholesales dollar increase that. smaller HELOC they of need for days margins spent expected mentioned. higher We That’s products our we're sale market of expands annexing to as big a the in think the determinant. Yes, fourth still and the smaller and we amounts – margin loan are And cash in balances quarter,

gain, morning it – as a first net as look we not at net side. So cannibalizing the

you. it. got Thank Okay,

with comes Your Joseph Jefferies. Kyle question from next

Your is open. line

were midpoint the quarter. at looking know your they on be question, having the just you're to you expecting guidance I you on of and kind side in I Hey! like retail looks Thanks for think and higher the even at was it margins but me my than answered

this is complete driving a and So then exit or shift correspondent outlook improved that’s there. just mix that a

wholesale. that's it, mix some Yeah, generally and exiting a shift

All question. for me. right, that's answering my Thanks it for

question comes Doug from Harter next Your Suisse. with Credit

your Your Mr. will line Doug I is now open. back line time. call over turn open. to questions Harter, There Frank this no is at further are the Martell.

Thanks Brent. Great!

Just one HELOC. quick on comment

times it I in XXXX. I us initial and we think say contributor stress to market. a is we and the We're the for digital you just solution, the about know we excited the of profit the of access most than we quicker engagement it's capital and unique in a be competition have would turnaround reaction in terms to the to think in very the do customer expect the generator think fast with are market. a significant

we – want its our structurally just excited that of having we're financial our by made results We product tremendous contributor operational are intended So to about call progress both an from and in XXXX I as that plan todays close effect. XXXX. is a to view. reiterating vision point

reduction groups goal and a home expenses, narrow of just in of where the to we the operating Our to increasingly bidding more diverse to company buying. the the buyers cohort be coming of as losses also that continue is revenue that and after purpose investing primary It’s the younger the be generative toward homebuyers future will can and future. the driven, diversification access skip lending of but through will in in our strategies and set continue importantly a overall we

we usage patterns products we and going are forward. develop that go their So services we think as fit to the

our the company leverage drive to continue and strength. will forward financial We

short longer everybody over challenging we forward we Pat so have team, want We think the continuing everybody next just in drive of behalf term positioned to XX and and the well our I on the period XX to for and time up-to-date see as to and both progress, we to term and through months, value. the the plenty on future, thank us we're cash the shareholder keep of the rest look to of

for thank concludes today's Ladies and you participating. gentlemen, call. This

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