Q2 2024 loanDepot Inc Earnings Call

Operator: dot com. A web task and transcript of this call will be posted to our website after the conclusion of this call.

A webcast and transcript of this call will be posted to our website website. After the conclusion of this call.

Gerhard Erdelji: A webcast and transcript of this call will be posted to our website after the conclusion of this call. On today's call, we have Loandepot President and Chief Executive Officer Frank Martell and Chief Financial Officer Dave Hayes to provide an overview of our quarter as well as our financial and operational results, outlook, and to answer your questions. We are also joined by Chief Investment Officer Jeff DerGurahian and LDI Mortgage President Jeff Walsh to help address any questions you might have after our prepared remarks. And with that, I'll turn things over to Frank to get us started.

Operator: On today's call, we have LoanDepot President and Chief Executive Officer, Frank Martell, and Chief Financial Officers, Dave Hayes, to provide an overview of our quarter as well as our financial and operational results. Outlook and to answer your questions.

Speaker Change: On today's call, we have loan depot, President and Chief Executive Officer, Frank Martell, and Chief Financial Officer, Dave Hayes to provide an overview of our quarter as well as our financial and operational results outlook and to answer your questions.

Operator: We are also joined by Chief Investment Officer Jeff DeGurahian and LDI Mortgage President Jeff Walsh to help address any questions you might have after our preferred remarks.

Speaker Change: We're also joined by Chief Investment Officer, Jeff <unk>, and LTI mortgage President, Jeff Walsh to help address any questions you might have after our prepared remarks.

Gerhard Erdelji: And with that, we'll turn things over to Frank to get us started. Frank.

Speaker Change: And with that I'll turn things over to Frank to get Us started.

Frank Martell: Thank you Gearhart I appreciate everyone, taking the time to join us on the call. This afternoon.

Frank Martell: Thank you, Gerhard. I appreciate everyone taking the time to join us on the call this afternoon. Today I look forward to sharing my perspectives on the following three topics. First, the progress we are making toward achieving our Vision 2025 strategic program. Second, Loandepot's Q2 operational and financial performance highlights, which I believe validate the significant progress and impact of Vision 2025. And third, and finally, our current view of market conditions and the outlook for the balance of 2024 and 2025.

Frank Martell: Thank you, Gerhard. I appreciate everyone taking the time to join us on the call this afternoon. Today I look forward to sharing my perspectives on the following three topics. First, the progress we're making toward achieving our Vision 2025 strategic program. Second, LoanDepot's Q2 operational and financial performance highlights, which I believe validate the significant progress and impact of Vision 2025. And third and finally, our current view of market conditions in the outlook for the balance of 2024 and 2025. As you know, we announced Vision 2025 in mid 2022 in response to one of the most abrupt and significant contractions in housing and mortgage volumes in a generation.

Speaker Change: Today I look forward to sharing my perspectives on the following three topics.

Speaker Change: The progress we are making towards achieving our vision 2025 strategic program.

Frank Martell: Second loan depots Q2 operational and financial performance highlights.

Speaker Change: I believe validate the significant progress and impact of vision 2025.

Speaker Change: And third and finally, our current view of market conditions and the outlook for the balance of 2024 and 2025.

Speaker Change: As you know we announced vision 2025 in mid 2022 in response to one of the most abrupt and significant contractions in housing and mortgage volumes in a generation.

Frank Martell: As you know, we announced Vision 2025 in mid-2022 in response to one of the most abrupt and significant contractions in housing and mortgage volumes in a generation. Over the past two years, Vision 2025, with its four strategic pillars, has been the battle plan that we followed to tackle market realities in the short term while positioning the company for profitable growth, market leadership, and sustained value creation in the years ahead. A brief description of the scope of the four pillars of Vision 2025, as well as a short synopsis of the progress we've made on each of these pillars, follows.

Frank Martell: Over the past two years, Vision 2025, with its four strategic pillars, has been the battle plan that we followed to tackle market realities in the short term while positioning the company for profitable growth, market leadership, and sustained value creation in the years ahead.

Frank Martell: A brief description of the scope of the four pillars of Vision 2025, as well as a short synopsis of the progress we made against each of these pillars, follows. Pillar number one focuses on transforming the company's origination business and driving purchase transactions with expanded emphasis on purpose-driven lending and first-time home buyers. Over the past two years, we've added new products that address affordability issues such as Access One Plus and Access Zero. We've expanded our VA lending operation, and we've invested in our point of sale and Mellow Home platforms. Pillar number two, which centers on investing in profitable growth-generating initiatives and launching innovative, cutting-edge solutions that form the foundation of a life cycle relationship with first-time home buyers and homeowners.

Frank Martell: Pillar number one focuses on transforming the company's origination business and driving purchase transactions with an expanded emphasis on purpose-driven lending and first-time homebuyers. Over the past two years, we've added new products that address affordability issues, such as Access One Plus and Access Zero.

Frank Martell: We've expanded our VA lending operation, and we've invested in our point-of-sale and mellow home platform. Pillar number two, which centers on investing in profitable growth-generating initiatives and launching innovative, cutting-edge solutions that form the foundation of a lifecycle relationship with first-time homebuyers and homeowners. In this area, we launched and expanded our home equity suite of products, including a home equity line of credit and standalone second mortgage loan.

Frank Martell: In this area, we launched and expanded our home equity suite of products, including a home equity line of credit and standalone second mortgage loan. We deployed our next generation Mellow Now digital underwriting engine, brought our servicing business in-house, and expanded our unique joint venture business with home builders. Pillar three calls for the reducing complexity and simplifying our organization structure, with an emphasis on driving client engagement, quality, automation, and operating leverage. To date, we have revamped our compensation programs to drive revenue and best-in-class quality. as well as support recruitment and retention of best available talent. We've also reduced the number of organizational management layers and eliminated unnecessary silos in many parts of the organization, including loan production and operations.

Frank Martell: We deployed our next generation MellowNow digital underwriting engine, brought our servicing business in-house, and expanded our unique joint venture business with HomeBuilders. Pillar 3, calls for reducing complexity and simplifying organization structure with an emphasis on driving client engagement, quality, automation, and operating leverage. To date, we have revamped our compensation programs to drive revenue and best-in-class quality, as well as support the recruitment and retention of the best available talent. We've also reduced the number of organizational management layers and eliminated unnecessary silos in many parts of the organization, including loan production and operations.

Frank Martell: And finally, pillar 4 targets the aggressive right-sizing of Loandepot's cost structure to be in line with marketing realities while investing in our long-term goal of becoming the lowest cost, highest quality producer of home blending solutions. By the end of 2023, we had reduced annualized non-volume-related expenses by over $660 million from the second quarter of 2022. During the first half of this year, we completed an additional $120 million productivity program. The implementation of Vision 2025 has been instrumental in successfully navigating the historic downturn in the mortgage market over the past few years. We've reset the organization for the reality markets while building our operational capabilities.

Frank Martell: And finally, Pillar 4 targets the aggressive right-sizing of Loandepot's cost structure to be in line with marketing realities while investing in our long-term goal of becoming the lowest cost, highest quality producer of home lending solutions. By the end of 2023, we will have reduced annualized non-volume related expenses by over $660 million from the second quarter of 2022. During the first half of this year, we completed an additional $120 million productivity program. The implementation of Vision 2025 has been instrumental in successfully navigating the historic downturn in the mortgage market over the past few years.

Frank Martell: We've reset the organization for the reality of markets while building our operational capability. While we've delivered on a comprehensive set of reductions to our expense base, Vision 2025 is far more than just a cost-cutting exercise. It also requires us to continually invest in our people, products, and technology platforms.

Frank Martell: While we've delivered on a comprehensive reduction of our expense base, Vision 2025 is far more than just a cost-cutting exercise. It also requires us to continually invest in our people, products, and technology platforms. We believe these investments position the company to significantly expand market share and grow profitability going forward.

Frank Martell: We believe these investments position the company to significantly expand market share and grow profitability going forward. In the coming months, we will be pivoting from Vision 2025 to a new strategic plan, which will lay out the roadmap we plan to follow to innovate and drive sustainable market leadership and durable, profitable growth as a lifetime partner for customers over the course of their entire home ownership journey. We plan to announce the details of our new strategic plan during our upcoming Q3 earnings release cycle. Now, in terms of our second quarter performance,

Frank Martell: Over the coming months, we will be pivoting from Vision 2025 to a new strategic plan, which will lay out the roadmap we plan to follow to innovate and drive sustainable market leadership and durable, profitable growth as a lifetime partner for customers over the course of their entire home ownership journey. We plan to announce the details of our new strategic plan during our upcoming Q3 earnings release cycle. Now, in terms of our second quarter performance, by most measures, I believe we delivered our strongest operational results since the beginning of the market downturn. As I mentioned earlier, I also believe that Lone Depot's Q2 operational financial performance provides important points of reference for the process, progress, and impact of Vision 2025.

Frank Martell: By most measures, I believe we have delivered our strongest operational results since the beginning of the market downturn. As I mentioned earlier, I also believe that Loandepot's Q2 operational financial performance provides important points of reference for the progress and impact of Vision 2025. Our positive operational momentum was driven by profitable adjusted total revenue growth, as well as our ongoing commitment to cost discipline and the progressive introduction of platforms and tools that support automation and operating leverage.

Frank Martell: Our positive operational momentum was driven by profitable adjusted total revenue growth, as well as our ongoing commitment to cost discipline and the progressive introduction of platforms and tools, which support automation and operating leverage. We also continue to see strong contributions from our well-regarded servicing operation. The combination of those factors contributed to higher margins and market sure gain in our origination business in Q2. In terms of total profitability, in Q2, we achieved positive adjusted EBITDA of 35 million and reduced our adjusted net loss by 56 percent year-on-year to $16 million. When final and important note on Q2, during the quarter, we successfully completed a tender exchange of our 2025 unsecured notes and reached a tentative agreement to settle class action litigation associated with our January cyber attack.

Speaker Change: Our positive operational momentum was driven by profitable adjusted total revenue growth as well as our ongoing commitment to cost discipline and the progressive introduction of platforms and tools, which support automation and operating leverage.

Frank Martell: We also continue to see strong contributions from our well-regarded servicing operations. The combination of those factors contributed to higher margins and market share gains in our origination business in Q2. In terms of total profitability, in Q2, we achieved positive adjusted EBITDA of $35 million and reduced our adjusted net loss by 56% year-on-year to $16 million.

Speaker Change: We also continued to see strong contributions from our well regarded servicing operation.

Speaker Change: The combination of those factors contributed to higher margins and market share gain in our origination business in Q2.

Speaker Change: In terms of total profitability in Q2, we achieved positive adjusted EBITDA $35 million and reduced our adjusted net loss by 56% year on year to $16 million.

Speaker Change: One final and important note on Q2 during the quarter, we successfully completed a tender exchange of our 2025 unsecured notes and reached a tentative agreement to settle class action litigation associated with our January cyber attack.

Frank Martell: One final and important note on Q2: during the quarter, we successfully completed a tender exchange of our 2025 unsecured notes and reached a tentative agreement to settle class action litigation associated with our January cyber attack. These milestone achievements, which Dave will elaborate on a bit later, provide important clarity and visibility for all of our stakeholders. Looking forward to the balance of 2024 and into 2025, in July, the Mortgage Bankers Association increased their forecast of 2025 mortgage market volumes to $2.1 trillion. This compares with their current estimate of $1.8 trillion for 2024.

Speaker Change: Okay.

Frank Martell: These milestone achievements, which we will elaborate on a bit later, provide important clarity and visibility for all of our stakeholders. and Jeff Walsh. Looking forward to the balance of 2024 and into 2025, in July, the Mortgage Bankers Association increased their forecast of 2025 mortgage market volumes to $2.1 trillion. This compares with their current estimate of $1.8 trillion for 2024. As we look ahead based on increasing potential for moderation of mortgage interest rates, as well as more homes for sale going into 2025, we believe there is an increasing possibility of an upward trend in housing transactions and mortgage market activity led initially by growing household formation trends and the demand for home equity linked mortgage products for home improvement, debt consolidation and or personal liability management.

Speaker Change: These milestone achievements, which Dave will elaborate on a bit later provide important clarity and visibility for all of our stakeholders.

Speaker Change: Looking forward to the balance of 2024 and into 2025.

Speaker Change: In July the mortgage bankers Association increased their forecast of 2025 mortgage market volumes to $2 one trillion.

Speaker Change: This compares with their current estimate of $1 eight trillion.

Speaker Change: For 2024.

Dave Hayes: As we look ahead based on increasing potential for moderation of mortgage interest rates as well as more homes for sale.

Frank Martell: As we look ahead, based on the increasing potential for moderation of mortgage interest rates, as well as more homes for sale, Going into 2025, we believe there is an increasing possibility of an upward trend in housing transactions and mortgage market activity, led initially by growing household formation trends and the demand for home equity-linked mortgage products for home improvement, debt consolidation, and or personal liability management. Over the past six months, we have been investing in our origination capabilities by boosting the number of loan officers and operational staff, as well as investing in products and processes that will provide operating leverage with a specific focus on a range of home equity solutions, as well as refinancing and purchase products.

Speaker Change: Going into 2025, we believe there is an increasing possibility of an upward trend in housing transactions and market mortgage market activity.

Frank Martell: Over the past six months, we have been investing in our origination capabilities by boosting the number of loan officers and operational staff, as well as investing in products and processes that will provide operating leverage with specific focus on a range of home equity solutions, as well as refinancing and purchased products. The company is also actively working to expand our in-market retail franchise with additional staffing and product offerings, which primarily serves the largest portion of the market home purchase. With the investment in new products, people and platforms that we've made today, and those currently in flight, we believe we're increasingly well positioned to expand market share and accelerate our revenue growth with our expanding portfolio of lending and lending adjacent solutions for homeowners as market volumes begin to track upward heading into 2025.

Frank Martell: The company is also actively working to expand its in-market retail franchise with additional staffing and product offerings, which primarily serves the largest portion of the market, home purchase. With the investment in new products, people, and platforms that we've made today and those currently in flight, we believe we're increasingly well positioned to expand market share and accelerate our revenue growth, with our expanding portfolio of lending and lending-adjacent solutions for homeowners as market volumes begin to track I want to conclude my prepared remarks today by thanking Team Loandepot and our other stakeholders for their ongoing support.

Frank Martell: I want to conclude my prepared remarks today by thanking Team Lone Depot and our other stakeholders for their ongoing support. Our focus on delivering against our vision 2025 in Paradise is positioning us for the future while creating a pathway for market leadership and profitability as the market returns to more normal levels of activity.

Frank Martell: Our focus on delivering against our Vision 2025 imperatives is positioning us for the future while creating a pathway for market leadership and profitability as the market returns to more normal levels of activity. With that, I'll turn the call over to Dave, who will take us through our financial results in more detail.

Gerhard Erdelji: With that, I'll turn the call over today. We'll take us to our financial results in more detail.

David Hayes: Thanks Frank and good afternoon everyone. Our adjusted net loss decreased from $36 million in the second quarter of 2023. As part of this transaction, we recorded a $6 million loss on the extinguishment of debt. With that, we're ready to turn it back to the operator for Q&A. Operator?

Dave Hayes: Thanks, Frank.

Dave Hayes: In good afternoon, everyone. Our adjusted net loss decreased from $36 million in the second quarter of 2023 to $16 million in the second quarter of this year due both to higher adjusted revenues and lower operating expenses. Total expenses in the quarter were impacted by approximately $37 million of non-operational charges that Frank touched on. We accrued $27 million primarily as part of reaching an agreement in principle to settle the class action litigation related to the January 2024 cyber incident, in which, as Frank noted, we'll put the impact of this class action cyber litigation quickly behind us.

Dave Hayes: We also successfully completed a tender exchange of our 2025 unsecured notes, extending the maturity to 2027 and reducing outstanding corporate debt by $137 million. As part of this transaction, we recorded a $6 million loss on the extinguishment of debt. During the second quarter, pull-through weighted rate lock volume was $5.8 billion, which represented a 5% decrease from the second quarter of 2023 and reflected the ongoing impact of higher rates and the lack of supply of home sales.

Dave Hayes: Walsh. Rate lock volume came in within the guidance we issued last quarter of $4.5 billion to $6.5 billion and contributed to adjusted total revenue of $278 million compared to $269 million in the second quarter of 2023. The year-over-year increase in adjusted total revenue is primarily a result of higher servicing sea income and pull through way to gain on sale margin. Our pull through way to gain on sale margins for the second quarter came in at 322 basis points above our guidance of 260 to 290 basis points and compared to 285 basis points in the second quarter of 2023.

Dave Hayes: Our higher gain on sale margin benefited from the reversal of the lost provision, reflecting the strong credit performance of a historical production vinegar, as well as growing contributions of higher margin home equity prior. Our loan origination volume was $6.1 billion for the quarter, a decrease of 3% from the second quarter of 2023. This was also within the guidance we issued last quarter of between $5 billion and $7 billion. While origination volume was down, our market share resumed its growth sector following the cyber-related interaction of the business during the first quarter. Our market share improved to 142 basis points in the quarter compared to 136 basis points in the second quarter of 2023.

Dave Hayes: Servicing fee income increased from $120 million in the second quarter of 2023 to $125 million in the second quarter of 2024, due in part to higher earnings credits on custodial balances from higher interest rates. As part of the debt exchange, we opportunistically took advantage of strong market conditions and monetized approximately $29 billion of unpaid principal balance of our mortgage servicing rights. As a result of the smaller portfolio, we expect servicing revenue to decrease somewhat going forward. We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value in the result of our operation.

Dave Hayes: We believe this strategy protects against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to changing the interest rate environment. Our total expenses for the second quarter of 2024 increased by $12 million, or 4%, from the prior year quarter. The primary drivers of the increase were the previously mentioned one-time charges related to the expected settlement of the cyber-related litigation and cost associated with the tender exchange transaction. These were offset somewhat by lower personnel-related costs driven by headcounts falling by over 400 FTE during the period and lower marketing costs.

Dave Hayes: We are pleased to report that we completed our $120 million supplemental productivity program during the second quarter. These improvements were primarily achieved through decreased third-party vendor spend, lower salary expenses, and reduced real estate-related costs. Restructuring related and impairment charges totaled $4 million, down from $6 million in the second quarter of 2023.

Dave Hayes: DeBey. Excluding the $27 million cost of the cyber incident, the $6 million loss in the extinguishment of the debt, and the $4 million restructuring and asset impairment charges, we accomplished meaningful expense savings, reducing operating expenses by 6% to $306 million in the second quarter of $24, from $324 million in the second quarter of $23 on a comparable basis. Looking ahead to the third quarter, we expect both pull-through weighted and origination volumes of between $5 billion and $7 billion. We also expect our third quarter pull-through weighted gain-on-sale margin to be between 280 and 300 basis points.

Speaker Change: Cost of the cyber incident.

Speaker Change: $6 million loss in extinguishment of the debt in.

Speaker Change: In the $4 million restructuring and asset impairment charges we.

Speaker Change: We accomplished meaningful expense savings, reducing operating expenses by 6% to $306 million in the second quarter of 'twenty four from $324 million in the second quarter of 'twenty three on a comparable basis.

Speaker Change: Looking ahead to the third quarter, we expect both pull through weighted and origination volumes of between $5 billion.

Speaker Change: And $7 billion.

Speaker Change: We also expect our third quarter quarter pull through weighted gain on sale margin to be between 280 and 300 basis points.

Speaker Change: During the third quarter, we expect expenses will decrease primarily reflecting the unique charges, we incurred during the second quarter.

Dave Hayes: During the third quarter, we expect expenses will decrease, primarily reflecting the unique charges we incurred during the second quarter. Our cost reset, balance sheet management activities, and the proactive resolution about standing litigation had significantly reduced our risk profile in charge of the pathway towards profitability, while allowing us to maintain a strong liquidity position, where we ended the quarter with $533 million of cash. At the same time, we have continued to make investments in our people, platforms, and programs. While persistently higher interest rates have put pressure on market volumes, we are laser-focused on our commitment to profitability and continue to work with Scythapoints to grow revenues and manage costs.

Speaker Change: Our cost reset balance sheet management activities and the proactive resolution of outstanding litigation has significantly reduced our risk profile and charted a pathway towards profitability, while allowing us to maintain strong a strong liquidity position, where we ended the quarter with $533 million of cash.

Speaker Change: At the same time, we have continued to make investments in our people platforms and programs.

Speaker Change: While persistently higher interest rates that put pressure on market volumes. We are laser focused on our commitment to profitability and continue to work with discipline to grow revenues and manage costs.

Speaker Change: With that we're ready to turn it back to the operator for Q&A operator.

Operator: With that, we're ready to turn it back to the operator for Q&A.

Operator: Operator? Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you were called upon to ask your question and listening via loudspeaker in your device, please pick up your headset and ensure that your phone is not on mute when asking your question. Again, please press star one to join the queue.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.

Speaker Change: I would like to withdraw your question. Thank you press Star one again.

Speaker Change: You are called upon to ask your questions and listening via loud speaker in your device. Please speak up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Again, Please press star one to join the queue.

Douglas Harter: Your first question comes from the line of Douglas Harder. Please go ahead. Thanks. Could you first talk about what was the coupon on the MSR that you sold in the quarter?

Speaker Change: Your first question comes from the line of Douglas Harter. Please go ahead.

Operator: Thanks. Could you first talk about what type of, or what was the coupon on the MSR that you sold in the quarter?

Speaker Change: Yes.

Could you first.

Douglas Harter: Talk about what.

Douglas Harter: What type or what was the coupon on the MSR that you sold in the quarter.

Jeffrey DerGurahian: Hey, Douglas, this is Jeff DeGurian. It was a lower coupon origination largely from 2020 and 2021 vengeance.

Douglas Harter: Hey, Doug This is Jeff <unk>.

Jeffrey DerGurahian: Hey Doug, this is Jeff DerGurahian. It was lower coupon originations, largely from the 2020 and 2021 vintages.

Speaker Change: Lower coupon originations largely from two.

Douglas Harter: 2020 in 2021 vintages.

Jeffrey DerGurahian: Great. And then just more broadly than as you look at your servicing portfolio, how do you think about the potential refinance opportunity that could come from it both today? Or is more of a rate move needed before you can unlock more volume? There's opportunity whether it's today through our home equity products that we continue to expand and enhance. Or if rates do happen to move lower, we'll obviously look to do rate and term refinances and deconsolidations to continue to help our borrower business.

Douglas Harter: Great.

Speaker Change: And then just more broadly then as you look at your servicing portfolio.

Speaker Change: How do you think about the potential refinance.

Douglas Harter: Opportunity.

Speaker Change: That could come from both today or are there or is more of a rate move needed before you kind of can unlock more volume.

Douglas Harter: Okay.

There is opportunity whether it's today through our home equity products that we continue to.

Douglas Harter: Expanded and enhanced or if rates do happen to move lower we will obviously look to.

Douglas Harter: Do rate and term refinances and debt consolidation to continue to help our borrower base.

Jeffrey DerGurahian: I mean, is there a sort of a rate that you're thinking about that might switch that opportunity from home equity to rate term? There's still a wide range of products and rates in the portfolio, so as the market moves, we continue to use the tools we have to optimize whatever outreach we have to our borrowers.

Douglas Harter: Because I mean is there.

Speaker Change: Sort of a rate that youre thinking about that might switch that opportunity from home equity to the right term.

Douglas Harter: There is still a wide range of products and rates in the portfolio. So as the market moves we continue to use the tools, we have to optimize whatever outreach we have to our borrowers.

Douglas Harter: Okay, thank you.

Speaker Change: Okay. Thank you.

Douglas Harter: Okay.

Derek Somers: Again, if you would like to ask a question, please press star one to join the queue. And your next question comes from the line of Derek Somers.

Douglas Harter: Again, if you would like to ask a question. Please press star one to join the queue and your next question comes from the line of Derek Chalmers. Please go ahead.

Derek Somers: Please go ahead.

Dave Hayes: Hey, good afternoon, everyone. Just looking into your Q3 guidance, could you maybe kind of break out what's embedded or what assumptions are embedded into that guidance, particularly on the volumes? Yeah, I can speak to it. So one of the probably biggest assumptions that we come off of the second quarter is we did have a loan loss reserve true of that benefited again on sale margin, which was about 18 basis points for the curative competitive. So that coming out will reduce our gain on sale margin closer to 305. And then I think just general market conditions, a little bit of mixed shift, maybe towards refinance, informed sort of our guidance for the third quarter.

Derek Chalmers: Hey, good afternoon, everyone.

Derek Chalmers: Just looking into your Q3 guidance could you maybe kind of break out what what's embedded them or what assumptions are embedded into that guidance, particularly on the volumes.

Speaker Change: Yes, I can speak to it.

Speaker Change: So one of the probably the biggest assumptions as we come off of the second quarter is we did have a loan loss reserve true up that benefited the gain on sale margin.

Speaker Change: Which was about 18 basis points for the year over year basis.

Derek Chalmers: Comparative so that coming out will reduce our gain on sale margin closer to 305, and then I think just general market conditions, a little bit of mix shift maybe towards refinance.

Derek Chalmers: Informed our guidance for the third quarter.

Derek Somers: Okay, got it.

Speaker Change: Okay got it and then and then how do you guys think about capacity moving forward. Both from you know on your warehouse lines and maybe from.

Dave Hayes: And then how do you guys think about capacity moving forward, both from on your warehouse lines and maybe from an operational head count perspective as well? I'll speak to the warehouse lines. We don't have any concerns on that front. We feel like we've got ample capacity and can ramp up as needed operationally.

Speaker Change: Operational head count perspective as well.

Speaker Change: I'll speak to the warehouse lines, we don't have any concerns on that front, we feel like we've got ample capacity.

Speaker Change: Ram up as needed.

Speaker Change: Operationally.

Dave Hayes: Yes, thanks for the question. So operationally, as I mentioned in my prepared remarks, over the last six months, we have been gradually increasing the number of LOs that we have and our operational capabilities as well, some through automation, some through staffing levels. And we're kind of leaning into the anticipation that the market will continue to rebound and rates will moderate. And, as I mentioned, I think that's an increasing likelihood. So we believe that we have the capacity to pick up incremental volume. But I think also the automation to pick up the operating leverage associated with that.

Speaker Change: Yes. Thanks for the question so operationally as I mentioned in my my prepared remarks.

Speaker Change: Over the last six months, we have been gradually increasing the number of <unk> that we have in our operational capabilities as well some through automation some through staffing levels and.

Speaker Change: We're kind of leaning in to the anticipation that the market will continue to rebound in rates will moderate in <unk>.

Speaker Change: As I mentioned I think thats, an increasing likelihood. So we believe that we have the capacity to pick up incremental volume, but I think also the.

Speaker Change: Automation to pick up the operating leverage associated with that so it's not as people intensive as it might have been in the past. So I think we're fairly well positioned.

Dave Hayes: So it's not as people-intensive as it might have been in the past. So I think we're fairly well positioned. And we're more optimistic about the rate environment. Got it.

Speaker Change: And we were more optimistic about the rate environment.

Speaker Change: Yes.

Speaker Change: Got it thank you I'll hop back in the queue.

Derek Somers: Thank you. I'll hop back in the queue.

Taylor DeBey: Your next question comes from the line of David. Please go ahead.

Speaker Change: Your next question comes from the line of Scott Davis. Please go ahead.

Taylor: Hey, guys. This is taylor on for J D.

Taylor DeBey: Hey guys, this is Taylor on for JD. So yeah, it was good to see total market share ticket up during the quarter. Can you just unpack that a little for us if there's anything of note that drove the higher growth rate relative to the industry?

Taylor: So yes. It was good to see total market share tick up during the quarter can you just unpack that a little for US. If there was anything of note that drove the higher growth rate relative to the industry.

Jeff Walsh: Yeah, this is Jeff Walsh. You know, I think our kind of unique channel mix allows us to kind of lean into various parts of the market, specifically new home build, which is a strong area for us. And cash out refinance, which is a growing segment that we're seeing both in the home equity side and also just the, you know, the debt consolidation side. And, you know, the most kind of unsure part of the market has been the resale market, just due to the availability of inventory. But, as Frank mentioned, we're kind of well positioned there as well with our in-market retail team and gaining share in that channel as well.

Speaker Change: Yes. This is Jeff Welch I think are kind of unique channel mix allows us to kind of lean into various parts of the market specifically new home build which is a strong area for us.

Speaker Change: And cash out refinance which is which is a growing segment that.

Speaker Change: We're seeing both in the home equity side and also just the <unk>.

Speaker Change: That consolidation side and the.

Speaker Change: The most kind of.

Speaker Change: Unsure of part of the market has been the resale market just due to the availability of.

Speaker Change: Inventory.

Speaker Change: As Frank mentioned, we're kind of well positioned there as well with our end market retail team and gaining share in that channel as well.

Taylor DeBey: Great, thanks.

Speaker Change: Great. Thanks.

Operator: There are no further questions at this time.

Speaker Change: There are no further question at this time Frank Martell.

Frank Martell: Frank Martell, I'd like to call it back over to you. Thank you, Kathleen. So look at it.

Speaker Change: Call back over to you.

Speaker Change: Okay.

Frank Martell: Thank you Kathleen.

Speaker Change: So look thank you everybody for joining our call today I want to thank.

Frank Martell: Thank you, everybody, for joining our call today. I want to thank Dave, Gerhard, Jeff Walsh, and Jeff DeGurahian, and the rest of our team for all the good work that's gone into implementing Vision 2025. And you're seeing that, I think, increasingly reflected in the financial results. I'm really proud of the dedication, resiliency, and accomplishments of Team Loan Depot. I do think that second quarter results clearly demonstrate the positive progress we're making. And I think with the rising potential of improving market fundamentals and trends heading into 2025, we're going to remain laser-focused on achieving sustainable profitability.

Speaker Change: David Gearhart, Jeff Walsh, and Jeff did Gary and the rest of our team for all the good work.

Frank Martell: That's gone into implementing vision 2025.

Speaker Change: And Youre seeing that I think increasingly reflected in the financial results I'm really proud of the dedication resiliency and accomplishments of chemo depot.

Speaker Change: I do think that second quarter results clearly demonstrate the positive progress we're making.

Speaker Change: And I think with the rising potential of improving market fundamentals and trends heading into 2025, we're going to remain laser focused on achieving sustainable profitability, but at the same time, becoming innovated and trusted partner for first time homebuyers.

Frank Martell: But at the same time, becoming the innovative and trusted partner for first-time home buyers throughout their journey of homeownership. At Loan Depot, we often talk about home means everything, and our growing teams of professionals deliver a complete suite of products and services that fuel the American Dream.

Speaker Change: Out their journey of Homeownership alone depot, we often talk about home means everything and our growing teams of professionals deliver a complete suite of products and services that fuel the American dream. So with that I. Appreciate everybody's time today and look forward to updating you in the future.

Frank Martell: So with that, you know, appreciate everybody's time today and look forward to updating in the future.

Speaker Change: Okay.

Operator: These concludes this conference call.

Speaker Change: This concludes today's conference call you may now disconnect.

Operator: You may now disconnect. Thank you.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: [music].

Speaker Change: Okay.