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loanDepot is scheduled to report its quarterly results on Monday, November 9. Analysts expect the company to report a small loss of about one cent per share on revenue of roughly 320 million dollars. The update will be a key check on "Project North Star," the company's plan to return to profitability by cutting costs and focusing on home equity loans. Investors will be looking to see if the lender can continue narrowing its losses despite interest rates that have kept the broader housing market quiet.
Average rates for 30-year fixed mortgages fell slightly last week to 7.3 percent. While this is the third consecutive weekly drop, it has not yet brought borrowers back to the market. Demand for refinancing, which is when homeowners swap their current loan for a new one to get a better rate or cash out equity, is 60 percent lower than it was a year ago.
For a lender like loanDepot, these high rates make it difficult to grow its traditional mortgage business. The company is currently pivoting toward home equity loans to offset this slump in standard refinances. Until rates drop enough to make moving or refinancing attractive again, the company will likely continue to rely on its cost-cutting plans to reach profitability.
Source: CNBC
Home construction is slowing down because the cost of building materials and labor has climbed. When it costs more to build, fewer new homes hit the market, which can keep home prices high and limit the number of new mortgages being signed.
For a mortgage lender like loanDepot, a shortage of new homes is a challenge. The company relies on a steady flow of home sales to generate new loans. If high costs keep builders on the sidelines, it makes it harder for the company to grow its loan business even if interest rates eventually fall.
Source: WSJ
The lender expanded eligibility for its 5x5 HomeLoan, a fully digital home equity line of credit, to qualified homeowners in 47 states. This product allows people to borrow against the value of their homes through a fast, online process rather than the weeks of paperwork required by traditional banks.
This expansion is a key part of the company's plan to grow its profit margins. By focusing on home equity loans, loanDepot can still find business even when high interest rates make it too expensive for most people to refinance their entire mortgage.
Source: Business Wire
The Personal Consumption Expenditures index, the Federal Reserve's preferred way to measure how fast prices are rising, showed inflation accelerated in September. This data arrived just one day after the central bank decided to keep interest rates where they are.
For a mortgage lender like loanDepot, this is a setback. Higher inflation usually means the Federal Reserve will keep interest rates elevated to cool the economy, which keeps mortgage rates high and discourages people from buying homes or refinancing their loans. The company's turnaround depends on a busier housing market, and that becomes harder to achieve if borrowing costs do not start to come down.
Source: NYTimes
Management has missed its own profit targets in six of the last eight quarters, showing that the business is still struggling to find its footing as high interest rates keep the housing market slow.
| Expectation | |
|---|---|
| EPS | $-0.01 |
| Revenue | $320M |