loanDepot reached profitability in the third quarter of 2024, bringing an end to an 11-quarter streak of financial losses. This turnaround was driven by cost reductions and revenue growth, fueled by lower interest rates that boosted refinancing activity.
As a result of this success, loanDepot is retiring its Vision 2025 strategic plan, which aimed to reduce non-volume expenses by over $730 million since its initiation in July 2022.
Replacing Vision 2025 is Project North Star, a program focused on the homeownership journey. This initiative prioritizes first-time homebuyers, purchase loans through expanded partnerships and geographic reach, servicing portfolio scale and retention, operational efficiency to reduce turn times, and talent acquisition and retention.
loanDepot president and CEO Frank Martell stated, “The launch of Project North Star builds upon the foundation laid by Vision 2025, emphasizing durable revenue growth, positive operating leverage, productivity, and investments in platforms that support our customers’ homeownership journey.”
In the third quarter of 2024, loanDepot reported a non-GAAP adjusted net income of $7 million, a significant improvement from the $15.9 million loss in the previous quarter and a $29.2 million loss in the same period last year. By GAAP standards, the net income for Q3 2024 was $2.6 million.
Chief financial officer David Hayes attributed the return to profitability to a modest improvement in the mortgage market and the company’s positive operating leverage during the quarter.
Looking ahead to 2025, Hayes anticipates market challenges but believes that Project North Star will enable loanDepot to capitalize on higher market volumes while maintaining sustainable profitability across various operating environments.
As part of its new initiatives, loanDepot recently announced a joint venture with Smith Douglas Homes, a top 50 homebuilder. The company is actively seeking more partnerships with builders, real estate agencies, and retail lenders nationwide.
According to filings with the Securities and Exchange Commission (SEC), loanDepot’s expenses in Q3 2024 totaled $311 million, representing a 9% decrease from the previous quarter but a 1.9% increase year-over-year due to higher volume-related costs.
Despite potential cost increases from expanding the team, loanDepot’s total revenues in Q3 2024 reached $314.6 million, marking an 18% increase from both the previous quarter and the same period last year.
Operational Business
Amidst the return to profitability, loanDepot saw an increase in mortgage production and volume. Origination volume for Q3 2024 reached $6.7 billion, surpassing investor expectations and up from $6 billion in the prior quarter. The pull-through gain-on-sale margin also improved from 3.22% in Q2 2024 to 3.29% in Q3 2024.
In August, loanDepot introduced a first-lien home equity line of credit (HELOC) to its product lineup, expanding borrowing options for homeowners. In September, the company appointed military advocate Bryan Bergjans to enhance its lending capabilities in the U.S. Department of Veterans Affairs (VA) sector.
Purchase loans accounted for 66% of loanDepot’s total volume in Q3 2024, down slightly from 71% in the same period the previous year. The company’s organic refinance consumer-direct recapture rate increased to 71% from 69% year-over-year.
Regarding loanDepot’s servicing portfolio, the unpaid principal balance (UPB) grew to $114.9 billion by the end of September, with servicing fee income at $124 million for Q3 2024.
Executives project a fourth-quarter origination volume of $6 billion to $8 billion, with a pull-through gain-on-sale margin expected between 2.85% and 3.05%. loanDepot closed the quarter with $480 million in cash reserves.
Looking ahead to the Mortgage Bankers Association’s forecast of $2.3 trillion in industrywide origination volume for 2025, Martell expressed confidence in loanDepot’s ability to capitalize on market opportunities, despite the fluctuating interest rate environment.
Following the earnings release, loanDepot stock surged to $2.35 in after-market trading, marking a 9.3% increase.