The good times don't last forever.
Earlier this morning, loanDepot unveiled its fourth quarter financial results to investors. Subsequently, the stock fell nearly 15% before recovering somewhat. What spooked them?
Well, for starters, loanDepot's profits fell from $154.2 million in the third quarter to just $14.7 million. A year ago, loanDepot made $547.2 million in profit. Gain-on-sale margins during Q4 came in at 223 basis points, down 61 bps from Q3.
The lender expects pressure on margins to last between one and three quarters.
Still, loanDepot Tony Hsieh remains an optimist (at least publicly, anyway). In today's earnings call, he pointed out that loanDepot increased its market share in 2021 to 3.4%. He also told analysts that loanDepot is arguably "the most diversified modern time originator in today's marketplace." While Rocket and UWM are "both great businesses, great competitors," they're either 50-50 consumer direct and wholesale or 100% wholesale.
"If you look at our model, we are fishing from a lot more pond," he said.
"Last year we generated over 10 million top of the funnel leads, and we expect to have at least that level going forward this year in a market that's decreasing 30-plus percent," he said. "That's going to give us an opportunity to increase market share."
An analyst pointed out that loanDepot's strategy isn't resonating with investors, to which Hsieh replied: "Yeah, and my response to that is you know, we're obviously disappointed as well but this is the second inning of a long game."
We know from other mortgage industry executives and analysts that margins are likely going to get razor-thin in 2022, a natural consequence of the industry fattening up for $4 trillion in volume and then needing to crash diet.
I'm curious if the LOs out there share Tony Hsieh's thesis: a few of the top mortgage companies will take their lumps and weather the storm, but smaller lenders that don't have the cash on hand or the credit lines will go out of business or be scooped up.
I'd also like to hear from the LOs out there who are chasing these "top of funnel" digital leads. What is the quality of those leads in your experience? And how good is your lender at capturing them?
Shoot me an email anonymously at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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