The amount of a $25 million settlement from a January cyber attack has not yet been determined, and net losses increased by $66 million in the second quarter, but executives said they are in a better position for growth after selling $29 billion in mortgage servicing rights.
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LoanDepot executives said they are in a better position to grow after restructuring debt and boosting second-quarter revenue to the highest level since the market downturn began in 2022.
But a $27 million charge related to a pending settlement of a January cybersecurity attack that affected nearly 17 million customers weighed on second-quarter earnings, and the Irvine, California-based bank reported a net loss of $65.8 million on Tuesday.
That was down 8% from the first quarter’s net loan losses of $71.5 million, while net income grew 19% to $265.4 million. Excluding a $12.6 million write-down on the fair value of loanDepot’s mortgage servicing rights portfolio, adjusted total income rose to $278 million – the highest level in two years.
“By most measures, we delivered our strongest operating results in the second quarter since the market downturn that began in the first quarter of 2022,” LoanDepot President and CEO Frank Martell said in a statement. “As we near the end of 2022 With the launch of our Vision 2025 strategic plan in July 2020, we have significantly improved our operating performance while laying the foundation for the company’s long-term success. “
LoanDepot’s shares, which have traded as low as $1.14 and as high as $3.47 last year, rose 4% to $2.15 in after-hours trading following Tuesday’s earnings release.
LoanDepot Mortgage Origination by Purpose
Source: LoanDepot earnings reports.
LoanDepot’s second-quarter mortgage originations were $6.09 billion, essentially the same as a year ago. But purchase loans grew 33% from the first quarter to $4.38 billion, and refinancing grew 35% to $1.71 billion.
“During the quarter, the company continued to build our in-market retail franchise, which helped us expand margins and market share growth,” Martell said. “In addition, we believe the company is increasingly positioned to capitalize on the availability of homeowners record levels of home equity for debt consolidation and home renovations, and with mortgage rates expected to rise, interest rates and term refinancing volumes will inevitably increase.
LoanDepot reduced its debt load by $137 million by bidding and exchanging $500 million of corporate notes due in the fourth quarter of 2025 and extending the maturity to 2027.
It achieved this feat in part by selling $29 billion in mortgage servicing rights (MSR). As of June 30, loanDepot’s MSR portfolio was $114.3 billion, down 20% from March 31. United Wholesale Mortgage, the largest mortgage lender, is pursuing a similar strategy on a larger scale, cutting its MSR portfolio by $110 billion this year.
Still, LoanDepot continued to collect monthly mortgage payments on 403,302 loans on behalf of investors, generating $125 million in second-quarter service fee revenue.
Reducing its MSR portfolio and restructuring debt has left LoanDepot with a stronger balance sheet, which includes $533 million in cash.
LoanDepot recognized $26.94 million in charges in the second quarter related to the January cyberattack, bringing the total cost of the attack to $41.6 million after expected insurance claims. These costs include costs of investigating and remediating the incident, costs of client notification and identity protection, professional fees including legal fees, litigation settlement costs and commission guarantees.
In the second quarter, the company set aside $25 million for anticipated settlements of class-action lawsuits related to cyberattacks.
David Hayes
Chief Financial Officer David Hayes said LoanDepot has reached a “settlement in principle” and is currently negotiating the terms of the settlement, which is expected to be submitted to the court for approval later in the third quarter.
“We believe the settlement will eliminate significant future uncertainty for our stakeholders,” Hayes said in a statement.
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