LoanDepot cleared $2B in profits, but margins are shrinking

LoanDepot cleared B in profits, but margins are shrinking
Just a week after its initial public offering, multichannel lender loanDepot announced that it had earned over $547 million in profits during the fourth quarter, giving it over $2 billion in earnings across 2020.

The lender, whose stock price skyrocketed following a downsized IPO that debuted at $14 a share, originated $37.4 billion in mortgages during the fourth quarter. LoanDepot captured $49.6 billion in rate lock volume, a quarterly record.

Though loanDepot originated $10.2 billion more in mortgages than it had in the third quarter, net income was down to $547.2 million from $728 million in the third quarter, and overall revenue ticked down 5% to $1.3 billion.

The declines in revenue and income were attributed largely to reduced gain-on-sale margins and increased expenses.

In the third quarter, loanDepot posted outsized margins of 4.98%. It fell to a more normalized 3.38% during the fourth quarter of 2020, the company disclosed in its earnings statement on Thursday. Throughout 2020, loanDepot averaged a gain on sale margin of 4.27%, easily a record for the California-based lender.

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Following its rebrand from Citadel Servicing Corp. to Acra Lending, the company has also launched a new jumbo prime program. 

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In its financial disclosures, loanDepot noted that its retail and wholesale channels delivered $28.3 billion in purchase originations during 2020, a 53% increase from the prior year. Still, the nonbank’s refinancing operation dwarfed its other business lines: loanDepot originated $72.5 billion in refinancings during 2020, a 170% increase over that of 2019.

Total expenses for the fourth quarter 2020 increased $110.4 million, or 17% from the third quarter 2020, due to higher payments to loan originators, an increase in staff, and a new national brand campaign.

In its earnings statement, loanDepot claimed to have achieved a higher degree of efficiency in the fourth quarter, stating that the number of team members grew 15% but loan originations grew 38%. The company also said its “Mello” technology allowed for an 8% decline in the cost per loan in 2020, while customer acquisition costs declined 28% year over year.

The company’s stock closed at $25.77 on Thursday, up 3.74% from the prior day.
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