In addition to $15 million in direct costs, LoanDepot said it lost $22 million in revenue due to the system failure, for a net loss of $72 million.
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LoanDepot executives said they continued to make progress in returning to profitability, but a cyberattack in January that exposed the personal information of 16.6 million people dented some of the company’s first-quarter momentum.
The Irvine, California-based mortgage lender reported on Tuesday that first-quarter revenue rose 7% from a year earlier to $223 million, while expenses fell 2% to $308 million. Those numbers combined still resulted in a net loss of $72 million for the quarter, down 22% from the same period last year.
Ransomware group ALPHV/Blackcat claimed responsibility for a security breach in January, which weighed on first-quarter results.
LoanDepot said the direct cost of handling the incident was $15 million and estimated that the company lost an additional $22 million in revenue because the system was offline and unable to lock in customer rates. The company previously reported that many of its systems, including a customer portal used to accept online loan applications, were offline for 10 days following the Jan. 8 incident.
Frank Martell
“The company was able to resume operations relatively quickly; however, the loss of revenue and additional expenses related to the incident impacted our first quarter financial results,” loanDepot President and CEO Frank Martell said in a statement. “We do not expect this incident to cause further disruption to our operations.”
LoanDepot also revealed that it incurred $1.1 million in legal fees “related to the anticipated settlement of legacy litigation.” In March, the company announced it had agreed to settle a 2022 assessment bias lawsuit filed by a Baltimore couple who claimed their home was undervalued because they are Black.
Last year, leanDepot’s shares traded as low as $1.14 and as high as $3.71, but the company’s shares were unchanged at $2.28 in after-hours trading after Tuesday’s earnings report.
Mortgage originations fell 9% in the first quarter compared with the same period last year
Mortgage originations were $4.56 billion, down 15% from the fourth quarter of 2023 and down 9% from the same period last year. Purchase loans make up the majority of LoanDepot’s business (72%) since rising mortgage rates removed the incentive for many homeowners to refinance.
Although loanDepot originated fewer loans, sales margin, a measure of loanDepot’s profitability when selling the loans it originates to investors, was 2.84%, up from 2.43% a year ago.
LoanDepot said it expects business to pick up in the second quarter and expects funding sources to reach $5 billion to $7 billion.
David Hayes
“While recent increases in interest rates have reduced industry forecasts for market capacity in 2024, we remain aggressively focused on plans to return to profitability,” Chief Financial Officer David Hayes said in a statement.
LoanDepot cut costs by $693 million last year as part of its Vision 2025 strategy to return to profitability, and has since continued to cut wages, albeit at a slower pace than in previous quarters.
LoanDepot had 4,188 employees as of the quarter, down from 4,250 employees on December 31 and 4,630 employees on June 30.
“We ended 2023 with positive revenue momentum and continue to make progress toward our Vision 2025 goals, including forward-looking investments in our people, products and technology platforms,” Martell said.
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