loanDepot, Inc. (NYSE:LDI) announced today its Vision 2025 plan to address current and expected mortgage market situations and position the Company for long-term value development. Using its strong balance sheet and liquidity as a foundation, the Company intends to significantly raise its concentrations on serving the purchase market as well as less rate-sensitive cash-out refinances, and modify its organizational structure with an emphasis on customer services, innovative digital consumer lending solutions, operating leverage, continue to invest in its servicing business and quality, and speed up it’s continuing rightsizing.
“In 2020 and 2021, like other mortgage businesses, we scaled our organization to meet the demands of historic mortgage volumes, particularly refinancing transactions,” said President and CEO Frank Martell.
Our Vision 2025 plan was designed to shift the Company toward increased profitability aggressively. Following two years of record-breaking volumes, the market shrank dramatically and suddenly in 2022. We are taking decisive steps to confront this situation. We are investing in areas of our business that we have identified as growth drivers over time, correcting our cost structure for current and anticipated market conditions, and preparing the Company for long-term value generation.
“As we work to become an increasingly purpose-driven Company, we want to be a leader on the key housing issues of our time — affordability, inclusion, and sustainability. Homeownership remains at the core of the American dream, and we plan to leverage our strengths to help make that dream a reality for more American families.” Chief Financial Officer Patrick Flanagan stated.
The demographics of home buyers are changing, and the Company intends to expand on its solid base to continue servicing the requirements of first-time homebuyers and disadvantaged neighborhoods. The country is more diverse, and they will encourage this trend by implementing Vision 2025. According to the Urban Institute’s 2021 research, “The Future of Headship and Homeownership,” 70% of new homeowners between 2020 and 2040 will be Hispanic. As the Company transitions to a more purpose-driven organization, it expects to increase its focus on addressing incessant gaps in equitable housing through credit-expansion initiatives such as Special Purpose Credit Programs while advancing the goal of increasing its share of lending for purchase transactions and maintaining the proper management of credit risk.
By the fourth quarter of 2022, the Company aims to launch its unique, all-digital home equity line of credit (HELOC). This competitive product is meant to provide homeowners with better accessibility to their record levels of home equity in as little as seven days, using a data and technology-driven application process.
loanDepot’s Continuation in Investments
loanDepot, one of the top 15 mortgage servicers in the United States, will continue investing in its in-house servicing operation to complement its origination strategy and assist its customers throughout the mortgage journey. The Company anticipates that by using its marketing and customer acquisition expenses across a diversified range of products and services, it will be able to capture additional revenue opportunities over time.
To better position itself in the rapidly changing mortgage industry, the Company plans to reduce its organizational structure. The new structure is intended to boost the Company’s lending for purchase transactions while maintaining top-quartile quality, enhancing automation, and reaching operating leverage.
The Company is working hard to align its cost structure with existing and projected mortgage origination volumes. Through personnel reduction, attrition, reduced marketing and third-party spending, business process optimization, and real estate consolidation, loanDepot expects to produce between $375 – $400 million in annualized savings by the end of 2022. Based on these savings, the Company intends to return to run-rate operating profitability by the end of 2022.
Staffing levels will fall from roughly 11,300 at the end of 2021 to approximately 6,500 by the end of 2022. The current headcount is 8,500, and severance and benefits-related payments of $3.5 – $4.5 million are scheduled in the second quarter of 2022. Other non-operating expenses connected to these initiatives that are projected to be incurred in the second quarter include about $2.0 million in real estate exit costs and around $2.5 – $3.0 million in outside service expenses.
The Company is expected to incur extra non-operating expenses during the second half of 2022 as part of its cost structure reconfiguration, including severance and benefits-related charges of roughly $25.0 – $28.0 million, real estate exit charges of nearly $2.5 – 3.5 million, and outside service costs of $7.0 to $9.0 million.
Management determined that it was required to complete an assessment of its goodwill and intangible assets during the second quarter as part of the Company’s routine and ongoing reporting procedure and recorded a non-cash impairment charge of $42.0 million as of June 30, 2022.
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