Shares in LoanDepot tumbled Tuesday after the company surprised investors by announcing that it does not expect to turn a profit this year and will lay off workers and suspend its quarterly dividend after posting a $91.3 million first quarter loss as it originated fewer — and less profitable — mortgages.
At $21.55 billion, LoanDepot’s first quarter loan originations were down 26 percent from the previous quarter and 48 percent from a year ago, when the mortgage refinancing boom helped the company originate $41.48 billion in loans.
With less profitable purchase loans now accounting for a bigger chunk of LoanDepot’s originations — 37 percent, versus 19 percent a year ago — profit margins were also down.
During the first quarter, gain-on-sale margin — the profit LoanDepot makes when it originates loans and sells them to investors — dropped to 1.96 percent. That compares to 2.98 percent gain-on-sale margin a year ago, when refinancings accounted for more than 80 percent of LoanDepot’s originations.
On a call with investment analysts, LoanDepot CFO Patrick Flanagan said the company expects loan originations and profit margins will continue to fall, with second quarter origination volume expected to come in between $13 billion and $18 billion, and gain-on-sale margin at between 1.60 percent and 2.10 percent.
Flanagan said LoanDepot slashed first quarter expenses by $88 million, with some of the 13 percent reduction from the previous quarter coming from lower marketing expenses.
“We are aggressively managing our cost structure to return to profitability by the end of the year,” Flanagan said. “We expect to achieve this goal by further reducing marketing expenses and personnel expenses through the addition of headcount reductions. Despite these further expense reductions, given our expectation for decreasing market volumes and the competitive pressures on margins, we do not expect to be profitable for the fiscal year ending 2022.”