LoanDepot's proxy war with Hsieh ends in an agreement

LoanDepot's board of directors announced a cooperation agreement Tuesday evening with Anthony Hsieh, the company's former CEO and current chairman, paving the way for the addition of a candidate he backed. The agreement puts to rest a proxy war that surfaced in February.

Effective immediately, Steve Ozonian, CEO of title insurance underwriter Williston Financial Group, will step in as a director. This addition will temporarily expand the board size from eight to nine members, though the headcount will revert back following the 2024 annual meeting, per loanDepot's press release.

In exchange, Hsieh – who has 57% voting power on the board– has agreed to not make any director nominations at 2023 and 2024 annual meetings.

Ozonian, along with current directors Andrew Dodson and Pamela Hughes Patenaude, will be nominated for election to three-year terms at the board's 2023 annual meeting. Dodson is managing partner of Parthenon Capital, an investor in loanDepot since 2009, and Patenaude is former deputy secretary at the Department of Housing and Urban Development.

Dawn Lepore, chair of the board's nominating and corporate governance committee, said in a written statement the agreement is in the best interest of the Foothill Ranch, California-based megalender and its shareholders.

"With this mutually beneficial resolution, we avoid the distraction of a contested election and management, under Frank Martell's leadership as CEO, can focus fully on the continued execution of our Vision 2025 plan to position LDI for long-term value creation. We look forward to the perspectives Steve will bring to the board and the continued contributions of Pam and Andrew."

Meanwhile, Hsieh, in a written statement, said that he has great expectations for Ozonian, which include "[bringing] a new and valuable perspective that will help loanDepot navigate the extraordinary challenges facing the mortgage industry."

Just like many players in the mortgage space, loanDepot has pursued cost cutting measures to stay afloat as origination volumes waned.

In mid July, the mortgage lender rolled out its Vision 2025 plan, which mainly centers around shrinking non-volume related expenses, through headcount reduction, attrition, business process optimization and cutbacks to marketing and third-party spending.

By the fourth quarter 2022, the company's actual non-volume related cost reduction totaled an annualized $519 million, an SEC filing said. Most of the cost savings stemmed from a 50% cut in its workforce throughout last year.

Despite this, Hsieh has been critical of whether that was enough to change the trajectory of the company to ensure success.

Following the company's fourth quarter earnings call in March, the former CEO called on the board a second time to reconsider the nomination of Ozonian, an idea he floated in February. The former CEO threatened to use "approximately 57% of combined voting power" to push his candidate of choice forward.

"LoanDepot cannot maintain the status quo if we are to succeed over the long-term," Hsieh wrote at the time. "The company's board would benefit from a fresh perspective amidst [market challenges] to ensure we emerge stronger relative to our competition."