Another notable mortgage lender has revealed plans to shed thousands of workers in an attempt to corral its budget, with LoanDepot announcing its intention to downsize from roughly 11,300 employees at the end of 2021 to 6,500 by the close of this year.
The California-based lender noted as part of its “Vision 2025” plan announcement that its current headcount sits at 8,500 employees, with severance and benefits-related payments of about $3.5 million to $4.5 million expected to be dispensed in the second quarter of this year.
“In 2020 and 2021, like other mortgage companies, we scaled our organization to meet the demands of unprecedented mortgage volumes, especially refinancing transactions,” LoanDepot president and CEO Frank Martell said. “After two years of record-breaking volumes, the market has contracted sharply and abruptly in 2022. We are taking decisive action to meet this challenge head on.”
“Our Vision 2025 plan has been constructed to aggressively pivot the company for improved profitability. We are investing in the areas of our business we have identified as growth drivers over time, rightsizing our cost structure for current and anticipated market conditions, and positioning the company for long-term value creation.”
The aggressive cost-cutting plan is projected to generate annualized savings of $375 million to $400 million by the end of this year, according to a company statement. The aim is “a return to run-rate operating profitability exiting 2022” after a net loss of more than $91 million in first-quarter 2022. Last year, LoanDepot brought in nearly $428 million in profits.
Patrick Flanagan, the company’s chief financial officer, said that LoanDepot’s finances are solid and described “a strong balance sheet and ample liquidity, with a current cash position of approximately $1 billion.”
But Flanagan also noted that LoanDepot anticipates “continued challenging market conditions, with mortgage originations projected to decline by roughly half in 2022 from 2021, including an accelerated decline in the second half of 2022, followed by a further decline in 2023.”
“We continued to reduce our costs significantly in the second quarter,” he said. “Over the next two quarters, we expect to accelerate these efforts and aggressively drive down our costs in line with our previously stated goal of exiting this year with a profitable operating run rate. After two years of substantial headcount and expense growth that was necessary to support unprecedented origination volumes, we are returning to previous levels of staffing and expense.”
The Vision 2025 plan also includes other components in addition to trimming of LoanDepot’s workforce. These components include increasing the company’s focus on purchase loan transactions while addressing diversity gaps; executing previously announced growth-generating initiatives, such as the launch of a new digital home equity line of credit (HELOC) by Q4 20202; and streamlining the company’s organizational structure to centralize management of originations and loan fulfillment.