Loan Depot Layoffs Impact Mortgage Market

Loan Depot layoffs have sent shockwaves through the mortgage market, leaving many wondering what's next. In 2022, Loan Depot announced it would be laying off around 2,500 employees.

This significant reduction in workforce is a clear indication of the company's struggles to adapt to the changing market conditions. The mortgage industry has been experiencing a slowdown due to rising interest rates and increased regulatory requirements.

Loan Depot's layoffs are not an isolated incident, as the company has been facing financial difficulties for some time. In 2021, Loan Depot reported a net loss of $123 million, a significant decline from the previous year's net income of $64 million.

Loan Depot cut more than half of its employees in 2022, shedding 6,113 employees and reducing its headcount from 11,307 to 5,194.

The company's "Vision 2025" plan aimed to restructure and downsize operations, increasing focus on servicing the purchase market, particularly first-time homebuyers.

Loan Depot's goal was to shrink non-volume related expenses by an annualized $375 million to $400 million, primarily achieved through headcount reduction, attrition, business process optimization, and reducing marketing and third-party spending.

The company exceeded its reduction goals by more than 25%, cutting expenses by $91.4 million from the third to the fourth quarter of 2022.

Loan Depot reported a net loss of $156.8 million in the fourth quarter, more than the $137.5 million loss recorded in the third quarter.

The company's total revenue fell by more than half in 2022 to $1.3 billion, a decline from $3.7 billion in 2021 due to "dramatic volatility" impacting the housing ecosystem.

Loan Depot's workforce reduction will result in the lender paying $18.6 million in severance payment expenses.

The company had 8,500 employees as of July 12, 2022, and aims to reduce its headcount to 6,500 by the end of 2022.

Loan Depot reported a net loss of $91.3 million in the first quarter, compared to a net income of $14.7 million from the previous quarter.

The company expects to save $2 million of real estate office costs and $2.5 million to $3 million outside service expenses in the second quarter.

Loan Depot had $1 billion in cash, according to SEC filings.

LoanDepot is making some leadership changes, including Jeff Walsh leading mortgage origination functions, Zeenat Sidi leading digital lending and mortgage-adjacent products and services, and Dan Binowitz leading loan fulfillment and servicing functions.

The company's "Vision 2025" plan aims to reduce loanDepot's headcount to 6,500 by the end of 2022, representing a total workforce reduction of 5,072 employees, or 44 percent, since June 30, 2021.

LoanDepot expects to save $2.5 million to $3.5 million in real estate and $9 million in outside service costs in the year's second half.

LoanDepot cut $45.6 million in expenses during the second quarter, an 8 percent reduction from the first three months of the year.

Most of those savings were achieved through reduced employee compensation due to layoffs, reduced and incentive commissions.

LoanDepot's "Vision 2025" plan set a target of reducing loanDepot's headcount to 6,500 by the end of the year.

The company now expects to not only meet, but exceed the Vision 2025 headcount reduction goal by the end of September.

LoanDepot's second quarter personnel expenses were down 37 percent from a year ago, to $296.6 million.

The company also slashed quarterly marketing expenses by 47 percent, to $60.8 million, helping reduce total expenses by 25 percent year-over-year, to $749.4 million.

LoanDepot shed more than half of its employees in 2022, cutting 6,113 employees to trim its headcount from 11,307 to 5,194 as of Dec. 31, 2022.

This massive layoff resulted in significant severance payment expenses for the company, totaling $18.6 million.

The lender's restructuring plan, dubbed "Vision 2025", aimed to restructure and downsize operations while increasing focus on servicing the purchase market, particularly first-time homebuyers.

The goal was to shrink non-volume related expenses by an annualized $375 million to $400 million, primarily achieved through headcount reduction, attrition, business process optimization, and reducing marketing and third-party spending.

LoanDepot actually exceeded its reduction goals by more than 25%, cutting expenses by $91.4 million from the third to the fourth quarter of 2022.

Despite going above and beyond to decrease spending, layoffs at the company are likely to continue, and the lack of profits is also expected to persist in 2023.