California-based loanDepot greatly increased loan origination volume in 2021, which guaranteed gains in marketshare compared to its competitors. But the multichannel lender’s gain-on-sale margin and net income fell significantly in the fourth quarter, reflecting changing market conditions.
Overall, net income for the mortgage lender decreased all the way down to $623.1 million in 2021, compared to $2 billion the previous year. LoanDepot also reported a massive quarter-over-quarter decrease in net income: it made $14.7 million in profit in the last three months of the year, down 90.5% from the $154.2 million it made in the third quarter. A year ago, loanDepot made $547.2 million in profit.
The decrease in net income was primarily driven by a dramatic decline in gain-on-sale margins – down to 2.61% in 2021, from 4.13% in the previous year. In the last quarter of 2021, the gain-on-sale margin was 2.23%, down about 60 basis points from Q3.
Higher expenses also impacted the net income. LoanDepot’s total expenses in 2021 increased to $3 billion, from $2.3 billion the previous year (it’s worth noting that personnel expenses increased to $1.929 billion, up from $1.531 billion the previous year). However, the company reduced the total expenses from $744.7 million to $694.1 million from the third to the fourth quarter of 2021, which likely stemmed from a decision to redesign compensation, which took effect in the second quarter.
More money was also pumped into marketing and advertising, with the company spending $467.5 million in 2021, compared to $264.3 million the previous year. The company highlighted its advertising campaigns and partnerships with Major League Baseball and the Miami Marlins.
Anthony Hsieh, loanDepot’s founder and CEO, said in a statement that the company’s industry is a cyclical one, but the business was “purpose-built with period of pressure in mind,” considering its proprietary tech stack, diverse mix of channels, and a marketing machine.
“We control our lead flow, our customer contact strategy and the point of loan origination. This is a critical competitive advantage, enabling us to pivot and adjust our production as market trends demand.”
The loan origination volume achieved $137 billion in 2021, an increase of 36% from the previous year. Refinances represented 71.2% of the total, growing from $72.4 billion to $97.6 billion in the period. Purchase loans grew 39% last year to $39 billion, with the number of retail loan officers up by 18%.
The company achieved a market share of 3.4% for the full year, up from 2.5% in 2020.
Regarding the servicing activity, loanDepot ended the year with a servicing portfolio of $162.1 billion in unpaid principal balance. The company recently announced it is bringing the servicing of FHA, VA and USDA funded Ginnie Mae loans in-house.
The lender’s earnings report shows that conventional conforming loans, as expected, made up the bulk of loanDepot’s business. The company originated $108.1 billion worth of conventional conforming loans in 2021, up from $79.9 billion in the previous year.
Loan origination of FHA/VA/USDA loans was the second-largest share of the pie. LoanDepot originated $18.3 billion government-insured loans in 2021, up from $17.5 billion in 2020.
The stock price of loanDepot on Tuesday at 10 a.m. EST was trading around $4.24 a share, down 9.6% after the company published the earnings.
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