Loandepot securitizes its warehouse line of credit

Loandepot has again turned to the capital markets to securitize its warehouse facility, the 10th such transaction it has undertaken.

The latest issuance is a $300 million transaction, Mello Warehouse Securitization Trust 2024-1. It has a two-year term and is backed by newly originated fixed or adjustable rate loans underwritten to Fannie Mae or Freddie Mac standards or are Ginnie Mae-eligible.

A presale report from Morningstar DBRS dated Sept. 20 noted that eight of the prior transactions had paid off. 

On Sept. 25, and in anticipation of this latest deal, Loandepot prepaid and terminated Mello Warehouse Securitization Trust 2021-3, a Securities and Exchange Commission filing said.

"No borrowings are currently outstanding under the 2021-3 Securitization Facility and loanDepot did not incur any termination penalties as a result of the termination of the 2021-3 Securitization Facility," the filing continued.

In the past, Loandepot was one of the four lenders that participated in a warehouse securitization from Jefferies Group.

Morningstar DBRS rated the $201 million Class A tranche at AAA(sf), reflecting the 33% credit enhancement the subordinated notes in the securitization provides.

"The AA (sf), A (sf), and BBB (sf) credit ratings reflect 31.90%, 21.40%, and 12.05% of credit enhancement respectively," the rating agency said. "The B (sf) credit rating on the Class E and Class F Notes reflect the Long-Term Issuer Rating of the Repo Guarantor."

Loandepot's obligations are guaranteed by LD Holdings Group LLC, an entity that owns a majority equity interest in the mortgage lender that Morningstar DBRS has given a B rating to.

Each class of the offering pays interest set at 30-days Term SOFR plus an applicable margin.

"This transaction further demonstrates the strength and breadth of Loandepot's financing strategy and attractive capital raising alternatives, as we continue our focus on delivering exceptional service to our customers throughout the entirety of their homeownership journey," said Chief Financial Officer David Hayes in a press release.

Loandepot lost just under $66 million in the second quarter, inclusive of a $27 million accrual in anticipation of a legal settlement over a data breach.

The credit ratings reflect transactional strengths that include the following: Well-qualified borrowers; ongoing third-party due diligence; standby servicer; experienced loan custodian; and margin maintenance," Morningstar DBRS said. 

"The transaction also includes the following challenges: Wet loans; limited scope of third-party due diligence; and representations and warranties framework."

U.S. Bank is the standby servicer and securities intermediary, while related firm U.S. Bank Trust Co. is the deal's indenture trustee, note calculation agent and collateral agent. Wilmington Savings Fund Society will serve as the owner trustee, and Deutsche Bank National Trust Co. is mortgage loan custodian.