Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- loanDepot Inc (LDI, Financial) achieved positive adjusted EBITDA of $35 million in Q2 2024.
- The company reduced its adjusted net loss by 56% year-on-year to $16 million.
- Successful completion of a tender exchange of 2025 unsecured notes, extending maturity to 2027 and reducing outstanding corporate debt by $137 million.
- Servicing fee income increased from $120 million in Q2 2023 to $125 million in Q2 2024.
- Market share improved to 142 basis points in Q2 2024 compared to 136 basis points in Q2 2023.
Negative Points
- Pull-through weighted rate lock volume decreased by 5% year-on-year to $5.8 billion.
- Loan origination volume was down 3% year-on-year to $6.1 billion.
- Total expenses increased by $12 million or 4% from the prior year quarter.
- The company accrued $27 million for class action litigation related to a January 2024 cyber incident.
- Servicing revenue is expected to decrease somewhat going forward due to the monetization of $29 billion of unpaid principal balance of mortgage servicing rights.
Q & A Highlights
Q: Could you first talk about what type of or what was the coupon on the MSR that you sold in the quarter?
A: Hi Doug, this is Jeff DerGurahian. It was lower coupon originations largely from 2020 and 2021 vintages.
Q: As you look at your servicing portfolio, how do you think about the potential refinance opportunity that could come from it, both today or are there -- or is more of a rate move needed before you can unlock more volume?
A: There's opportunity, whether it's today through our home equity products that we continue to expand and enhance. Or if rates do happen to move lower, we'll obviously look to do rate and term refinances and debt consolidation to continue to help our borrower base.
Q: Is there sort of a rate that you're thinking about that might switch that opportunity from home equity to rate term?
A: There's still wide range of products and rates in the portfolio. So as the market moves, we continue to use the tools we have to optimize whatever outreach we have to our borrowers.
Q: Just looking into your Q3 guidance. Could you maybe break out what's embedded or what assumptions are embedded into that guidance, particularly on the volumes?
A: Yes, I can speak to it. And so one of the probably biggest assumptions as we come off of the second quarter is we did have a loan loss reserve true-up that benefited the gain on sale margin which was about 18 basis points for the year-over-year comparative. So that coming out, we'll produce our gain-on-sale margin closer to three or five. And then I think just general market conditions a little bit of mix shift maybe towards refinance and form sort of our guidance for the third quarter.
Q: How do you guys think about capacity moving forward, both from on your warehouse lines and maybe from operational headcount perspective as well?
A: I'll speak to the warehouse lines. We don't have any concerns on that front. We feel like we've got ample capacity and can ramp up as needed operationally.
Q: Can you just unpack that a little for us if there's anything of note that drove the higher growth rate relative to the industry?
A: Yeah, this is Jeff Walsh. I think our unique channel mix allows us to lean into various parts of the market, specifically new home build, which is a strong area for us and cash out refinance, which is a growing segment that we're seeing both in the home equity side and also just the debt consolidation side. And the most -- I'm sure part of the market has been the resale market just due to the availability of inventory. But as Frank mentioned, we're well positioned there as well with our in-market retail team and gaining share in that channel as well.
Q: Could you maybe break out what's embedded or what assumptions are embedded into that guidance, particularly on the volumes?
A: Yes, I can speak to it. And so one of the probably biggest assumptions as we come off of the second quarter is we did have a loan loss reserve true-up that benefited the gain on sale margin which was about 18 basis points for the year-over-year comparative. So that coming out, we'll produce our gain-on-sale margin closer to three or five. And then I think just general market conditions a little bit of mix shift maybe towards refinance and form sort of our guidance for the third quarter.
Q: How do you guys think about capacity moving forward, both from on your warehouse lines and maybe from operational headcount perspective as well?
A: I'll speak to the warehouse lines. We don't have any concerns on that front. We feel like we've got ample capacity and can ramp up as needed operationally.
Q: Can you just unpack that a little for us if there's anything of note that drove the higher growth rate relative to the industry?
A: Yeah, this is Jeff Walsh. I think our unique channel mix allows us to lean into various parts of the market, specifically new home build, which is a strong area for us and cash out refinance, which is a growing segment that we're seeing both in the home equity side and also just the debt consolidation side. And the most -- I'm sure part of the market has been the resale market just due to the availability of inventory. But as Frank mentioned, we're well positioned there as well with our in-market retail team and gaining share in that channel as well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
