LoanDepot to cut 2,000 workers through the end of the year

LoanDepot will lay off 2,000 workers through the end of the year, part of a larger restructuring targeting profitability by the end of the year in response to the cooling mortgage market.

The Foothill Ranch, California-based lender unveiled its Vision 2025 Plan Tuesday, in which it will spend between $34.5 million to $40.5 million in total pre-tax related charges to trim payroll, shed real estate, reduce spending and restructure operations. The changes will generate approximately $375 million to $400 million in annualized savings, the company said. 

“I want to emphasize that Vision 2025 is far more than a cost-cutting exercise,” said Frank Martell, president and CEO, in a conference call Tuesday morning. “It's an important next step in our strategic evolution.”

The announcement comes a month ahead of the firm’s second quarter earnings report and factors in anticipated reduced origination volumes in 2023 stemming from an expected recession. LoanDepot reported a net loss of $91.3 million in the first quarter after a $14.7 million profit over the last three months of 2021.

In total, 4,800 employees will lose their jobs this year. The headcount will be reduced from a high of 11,300 employees last year who handled the industry’s refinance boom and record origination volume. As of June 30, the company’s headcount was 8,500; it will be 6,500 by the end of the year. 

LoanDepot said severance and benefits-related expenses are expected to cost between $3.5 million and $4.5 million in the second quarter alone. In total, it expects to pay $25 million to $28 million for all impacted employees. 

Other anticipated expenses include $2.5 million to $3.5 million in real estate exit costs due to the reduced headcount and remote and hybrid work models. The lender will also spend $7 million to $9 million in outside services related to the restructuring. 

The company, a top-15 servicer in the industry, said it will increase investments into its servicing operations.

“We do recognize and understand that a larger balance sheet of high-quality MSR does insulate us in the long-term from as much earnings volatility than you would have without it,” said Patrick Flanagan, chief financial officer. “So it is our intention to responsibly grow that side of the business.”

LoanDepot will also introduce by the end of the year a home equity line of credit product that can deliver homeowners equity in as little as seven days, it said. The lender also plans to increase its focus on less rate-sensitive cash-out refinances. The firm doesn’t plan to shut down any of its lending channels either, executives said in Tuesday's call.

“We think if you just look at the first quarter loss and compare that to the $1 billion cash, we think we have ample liquidity to see us through the cost-cutting measures especially if we return to run-rate profitability by the end of the year,” said Flanagan.

Going forward, LoanDepot Mortgage President Jeff Walsh will helm all origination functions, according to Tuesday's announcement; Managing DIrector of Ops and Servicing Dan Binowitz will lead all loan fulfillment and servicing; and Services President Zeenat Sidi will guide all digital lending and mortgage-adjacent products and services. Sidi was tapped in March to lead the company’s digital business unit mello.

Martell in April was named loanDepot’s president and CEO after leaving the same post at CoreLogic, while founder and largest shareholder Anthony Hsieh stepped back to remain with the firm as executive chairman.

LoanDepot said it will also reduce its third-party and marketing spending, most of which is focused around its retail network. Its significant marketing efforts with Major League Baseball involve long-term contracts and won’t be impacted, Flanagan said. 

When asked about guidance on the company’s gain-on-sale margin, executives declined to comment, deferring to the second quarter earnings call Aug. 9. 

The firm’s projected layoffs are among the largest by a mortgage business this year, rivaling major cuts at lenders including Better.com and JPMorgan Chase. The extent of terminations at other industry players like Wells Fargo remain unknown, while two other lenders have shuttered, impacting nearly all of their staffs.

LoanDepot was one of the largest nonbank mortgage lenders to go public in the midst of the pandemic’s refinancing boom. Its IPO launched on February 11, 2021 at $17.77 per share, hit a high of $31.48 per share the following day and as of midday June 12, 2022 it was selling for $1.68 per share.