loanDepot, Inc. Q3 FY2024 earnings call

Frank Martell highlighted the successful completion of Vision 2025 with four strategic pillars: transforming the origination business, investing in profitable growth initiatives, simplifying the organizational structure, and aligning the cost structure. The company has now launched Project North Star with five strategic pillars: becoming the leading lending partner for homeowners, especially first-time homebuyers; growing purchase mortgage reach and capabilities through geographic expansion and partnerships; investing in the servicing portfolio; building a low-touch, automated loan processing workflow; and becoming the mortgage industry's employer of choice. Frank also commented on the current housing and mortgage market outlook, noting challenges but a positive forecast for 2025 with the Mortgage Bankers Association projecting higher mortgage market volumes.

In the third quarter, loanDepot achieved profitability. Adjusted net income was $7 million, contrasting with an adjusted net loss of $29 million in the third quarter of 2023. Pull-through weighted rate lock volume stood at $6.7 billion, marking a 19% increase from the prior year's $5.8 billion. Origination volume for the quarter was $6.7 billion, a 9% rise from the prior year's $6.1 billion. Servicing fee income grew from $121 million in the third quarter of 2023 to $124 million in the third quarter of 2024. The pull-through weighted gain on sale margin for the third quarter was 329 basis points, exceeding the guidance of 280 to 300 basis points.

For the fourth quarter, loanDepot expects pull-through weighted lock volume to be between $5.5 billion and $7.5 billion and origination volume to be between $6 billion and $8 billion. The fourth quarter pull-through weighted gain on sale margin is anticipated to be between 285 and 305 basis points. Looking ahead to 2025, the company anticipates continued market challenges but believes Project North Star will enable capturing higher market volumes and achieving sustainable profitability.

Risks include market conditions changing, interest rate fluctuations, and inflationary costs from vendor spend.

Q: Regarding non-volume-related expenses and future expectations.

A: David Hayes stated that volume-related expenses fluctuate with origination levels, non-volume related expenses are expected to decrease over time, but the company is investing in revenue-generating initiatives, including staffing for loan officers and operations teams.

Q: About Project North Star's geographic expansion and partnerships.

A: Jeff Walsh said the company is geographically expanding in the South and Southeast regions organically and also expanding joint venture business with new builders, such as with Smith Douglas, and exploring real estate joint ventures in the retail channel.

Q: About sustainable profitability in 2025.

A: Frank Martell mentioned the MBA forecast and pent-up volume in the market, expecting refinancing to lead in 2025, and noted that Project North Star's work on fixed costs and automation will drive operating leverage.

Q: About growing the servicing portfolio.

A: Jeff DerGurahian said the servicing portfolio growth will come through organic addition and opportunistic acquisitions, and the company will use available financing lines to fund the growth to take profitable market share.

Q: About the loan originator (LO) recruiting environment.

A: Jeff Walsh said there is positive traction in the organic recruitment of loan originators, though it remains a competitive market with multiple offers made to high-producing LO's.

Q: About the Smith Douglas partnership.

A: Jeff Walsh said the joint venture business with Smith Douglas is a positive venture, operating differently from in-market retail, and new build has been a bright spot in the market in recent years.