Q1 2026 loanDepot Inc Earnings Call

May 5, 2026

Speaker #1: Good afternoon and welcome to loanDepot's first-quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator: Good afternoon, welcome to loanDepot's Q1 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I would now like to hand the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Operator: Good afternoon, welcome to loanDepot's Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star 1 again. I would now like to hand the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. I would now like to hand the call over to Gerhard Erdelji, Senior Vice President, Investor Relations, please go ahead.

Speaker #2: Good afternoon, everyone, and thank you for joining our first-quarter 2026 earnings call. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods.

Gerhard Erdelji: Good afternoon, everyone, and thank you for joining our Q1 2026 Earnings Call. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued earlier today, which is available on our website at investors.loandepot.com. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons. For more details on these non-GAAP financial measures, including reconciliation with most directly comparable GAAP measures, please refer to today's earnings release. A webcast and transcript of this call will be posted on our website after the conclusion of this call.

Speaker #2: For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued earlier today which is available on our website at investors.loanDepot.com.

Speaker #2: Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons.

Speaker #2: For more details on these non-GAAP financial measures, including reconciliation and most directly comparable GAAP measures, please refer to today's earnings release. A webcast and transcript of this call will be posted on our website after the conclusion of this call.

Speaker #2: On today's call, we have loanDepot's founder and Chief Executive Officer, Anthony Hsieh, and Chief Financial Officer, David Hayes. They will provide an overview of our quarter, a review of our operating results, and our outlook.

Gerhard Erdelji: On today's call, we have loanDepot's Founder and Chief Executive Officer, Anthony Hsieh, and Chief Financial Officer, David Hayes. They will provide an overview of our quarter, a review of our operating results, and our outlook. We're also joined by Chief Investment Officer, Jeff DerGurahian, and Chief Digital Officer, Dominick Marchetti, to help answer your questions after our prepared remarks. With that, I'll turn things over to Anthony to get us started. Anthony?

Speaker #2: We're also joined by Chief Investment Officer, Jeff Degurian, and Chief Digital Officer, Dominic Marchetti, to help answer your questions after our prepared remarks. And with that, I'll turn things over to Anthony to get us started.

Speaker #2: Anthony?

Speaker #3: Thank you, Gerhard. I appreciate everyone joining us on the call today. We are now three quarters into the rebuild of our company. And I believe that all of our hard work will soon be reflected in our financial performance.

Anthony Hsieh: Thank you, Gerhard. I appreciate everyone joining us on the call today. We are now 3 quarters into the rebuild of our company, and I believe that all of our hard work will soon be reflected in our financial performance. We spent the most recent quarter focused on a series of long-term growth initiatives that we expect will accelerate our momentum in coming months, including the addition of over 100 new loan officers, the reimagining and relaunch of our wholesale business, and the completion of our game-changing partnership agreement with Figure. I'll talk about each of these initiatives in more detail in a moment. I am pleased to share they are delivering promising early results. Since my return as CEO, I have been laser focused on our digital transformation as a key enabler of our return to a market-leading position.

Speaker #3: We spent the most recent quarter focused on a series of long-term growth initiatives that we expect will accelerate our momentum in coming months. Including the addition of over 100 new loan officers, the reimagining and relaunch of our wholesale business, and the completion of our game-changing partnership agreement with Figure.

Speaker #3: I'll talk about each of these initiatives in more detail in a moment, but I am pleased to share they are delivering promising early results.

Speaker #3: Since my return as CEO, I have been laser-focused on our digital transformation as a key enabler of our return to a market-leading position. We have focused on fully leveraging our unique assets and strategy, including one of the most differentiated customer acquisition and retention business models in the marketplace today.

Anthony Hsieh: We have focused on fully leveraging our unique assets and strategy, including one of the most differentiated customer acquisition and retention business models in the marketplace today. This included rebuilding our management team with members that have deep mortgage, technology, and marketing IQ. With this team now largely in place, we have spent the past several quarters hiring and training more loan officers with the goal of growing market share and positioning ourselves for accelerated growth when demand increases. This growth is broad-based and consists of newly trained loan officers graduating from our proprietary ACES program in our direct channel and experienced loan officers with established businesses in our retail channel. We also recently reopened our wholesale channel as part of our strategy to offer more products to our customers and leverage our existing infrastructure while limiting incremental expenses.

Speaker #3: This included rebuilding our management team with members that have deep mortgage technology and marketing IQ. With this team now largely in place, we have spent the past several quarters hiring and training more loan officers with the goal of growing market share and positioning ourselves for accelerated growth when demand increases.

Speaker #3: This growth is broad-based and consists of newly trained loan officers graduating from our proprietary ACES program and our direct channel, and experienced loan officers with established businesses in our retail channel.

Speaker #3: We also recently reopened our wholesale channel as part of our strategy to offer more products to our customers and leverage our existing infrastructure while limiting incremental expenses.

Anthony Hsieh: Response from the broker community has been very positive, with many directly reaching out seeking to partner with loanDepot. Despite a volatile market environment, these initiatives help us increase market share during the quarter, which I consider vital to our goal of achieving consistent profitability in the current market. Behind the scenes, we remain focused on reducing unit costs through operating leverage and automation. As demonstrated this quarter, we sharpened our marketing strategies to drive more lock volume to the top of the funnel while reducing marketing costs, increasing our return on marketing. Looking forward, I believe the digital migration of the customer will continue to accelerate, and we plan to be there to meet the customer.

Speaker #3: Response from the broker community has been very positive, with many directly reaching out seeking to partner with loanDepot. Despite a volatile market environment, these initiatives help us increase market share during the quarter.

Speaker #3: Which I consider vital to our goal of achieving consistent profitability in the current market. Behind the scenes, we remain focused on reducing unit costs through operating leverage and automation.

Speaker #3: As demonstrated this quarter, we sharpened our marketing strategies to drive more lock volume to the top of the funnel while reducing marketing costs. Increasing our return on marketing.

Speaker #3: Looking forward, I believe the digital migration of the customer will continue to accelerate, and we plan to be there to meet the customer. Led by our digital team, we are hard at work introducing cutting-edge technology and AL capabilities to our repeatable and scalable functions across each aspect of the origination and servicing lifecycle.

Anthony Hsieh: Led by our digital team, we are hard at work introducing cutting-edge technology and AI capabilities to our repeatable and scalable functions across each aspect of the origination and servicing lifecycles, including lead acquisition and conversion, loan officer and servicing CRM management, and route underwriting process. Our recently announced partnership with Figure Technology Solutions is expected to meaningfully accelerate our work and is delivering promising early results. As part of this partnership, we integrated Figure's proprietary credit and loan underwriting engine into our own proprietary mello technology platform, enabling us to seamlessly offer a variety of innovative home loan products to our customers. Importantly, our partnership also positions us to introduce new and innovative products that expand the way we serve borrowers in the future and capitalize on market improvements.

Speaker #3: Including lead acquisition and conversion, loan officer and servicing CRM management, and underwriting process. Our recently announced partnership with Figure Technology Solutions is expected to meaningfully accelerate our work in its delivering promising early results.

Speaker #3: As part of this partnership, we integrated Figure's proprietary credit and loan underwriting engine into our own proprietary Melo Technology platform. Enabling us to seamlessly offer a variety of innovative home loan products to our customers, importantly, our partnership also positions us to introduce new and innovative products that expand the way we serve borrowers in the future and capitalize on market improvements.

Speaker #3: The 5x5 home loan, which delivers approval in as little as five minutes, and funding in as few as five days for a real value to those seeking speed and convenience in their financial transaction.

Anthony Hsieh: The 5-by-5 home loan, which delivers approval in as little as 5 minutes and funding in as few as 5 days, brings real value to those seeking speed and convenience in their financial transaction. We integrate this platform across our channels, we expect to lower our cost of production, improve the customer experience, close more loans quickly, and advance our long-term objective of profitable market share growth. We also believe that this product will be a consistent contributor to the earnings power of the company as customers with record levels of home equity, historically low interest rates on their first trust deeds should remain a reliable source of demand even as interest rates fall. We look ahead with expectations of a large, larger market, our top-of-the-funnel customer acquisition advantage uniquely positions us to outperform our competition in a rapidly evolving and consolidating marketplace.

Speaker #3: As we integrate this platform across our channels, we expect to lower our cost of production and improve the customer experience, close more loans quickly, and advance our long-term objective of profitable market share growth.

Speaker #3: We also believe that this product will be a consistent contributor to the earnings power of the company. As customers with record levels of home equity, and historically low interest rates on their first trustees, should remain a reliable source of demand even as interest rates fall.

Speaker #3: As we look ahead with expectations of a large market, our top-of-the-funnel customer acquisition advantage uniquely positions us to outperform our competition in a rapidly evolving and consolidating marketplace.

Speaker #3: I am proud of the work that has been accomplished since my return to a full-time operating role. We plan to continue investing in and growing our top-of-the-funnel customer acquisition and origination capabilities.

Anthony Hsieh: I am proud of the work that has been accomplished since my return to a full-time operating role. We plan to continue investing in growing our top-of-the-funnel customer acquisition and origination capabilities. Leveraging our brand and marketing muscle, along with introducing contemporary technology, including AI, which will lower our costs and increase our operating efficiency. Ultimately, our goal are to deliver profitable market share growth, improve the borrower experience, drive customer retention, and deliver long-term shareholder value. This is our mission and what we are working towards every day. Regardless of interest rate movements, we are focused on delivering consistent profitability. We believe we are well on our way towards that goal. As rates fall, that timeline will be shortened. With that, I will now turn the call over to Dave, who will take us through our financial results in more detail. Dave?

Speaker #3: Leveraging our brand and marketing muscle, along with introducing contemporary technology including AI, which should lower our costs and increase our operating efficiency. Ultimately, our goal is to deliver profitable market share growth, improve the borrower experience, drive customer retention, and deliver long-term shareholder value.

Speaker #3: This is our mission and what we are working towards every day. Regardless of interest rate movements, we are focused on delivering consistent profitability. We believe we are well on our way towards that goal, and as rates fall, that timeline will be shortened.

Speaker #3: With that, I will now turn the call over to Dave, who will take us through our financial results in more detail. Dave?

Speaker #4: Thanks, Anthony. And good afternoon, everyone. The quarter reflected continued progress towards sustainable profitability offset by geopolitically driven market volatility. We reported an adjusted net loss of $34 million in the first quarter compared to an adjusted net loss of $21 million in the fourth quarter of 2025 due primarily to lower pull-through weighted gain on sale margin offset somewhat by lower expenses.

David Hayes: Thanks, Anthony. Good afternoon, everyone. The quarter reflected continued progress towards sustainable profitability offset by geopolitically driven market volatility. We reported an adjusted net loss of $34 million in Q1 compared to an adjusted net loss of $21 million in Q4 2025, due primarily to lower pull-through weighted gain on sale margin, offset somewhat by lower expenses. During Q1, pull-through weighted rate lock volume was $8.3 billion, which represented a 14% increase from the prior quarter's volume of $7.3 billion.

Speaker #4: During the first quarter, pull-through weighted rate lock volume was $8.3 billion, which represented a 14% increase from the prior quarter's volume of $7.3 billion.

Speaker #4: Pull-through weighted rate lock volume came in within the guidance we issued last quarter of 7.75 billion dollars to 8.75 billion dollars, and contributed to adjusted total revenue of $299 million which compared to $316 million in the fourth quarter of 2025.

David Hayes: Pull-through weighted rate lock volume came in within the guidance we issued last Q of $7.75 billion to $8.75 billion and contributed to adjusted total revenue of $299 million, which compared to $316 million in Q4 2025. As Anthony mentioned, the growth in rate lock volume was achieved while reducing marketing expenses by 12% during the Q. This positive operating leverage reflected improved strategies for mid-funnel lead conversion and our sharpened marketing strategies. Our pull-through weighted gain on sale margin for Q4 came in at 271 basis points at the low end of our guidance range of 270 to 300 basis points and down compared to 324 basis points prior to the prior Q.

Speaker #4: As Anthony mentioned, the growth in rate lock volume was achieved while reducing marketing expenses by 12% during the quarter. This positive operating leverage reflected improved strategies for mid-funnel lead conversion and our sharpened marketing strategies.

Speaker #4: Our pull-through weighted gain on sale margin for the fourth quarter came in at $271 basis points, at the low end of our guidance range of $270 to $300 basis points, and down compared to $324 basis points prior to the prior quarter.

Speaker #4: Our lower gain on sale margin primarily reflected interest rate volatility and product mix shift. The geopolitical environment created a sharp increase in interest rates during the first quarter, and we originated fewer higher margin FHA/VA and HELOC loans and originated more conventional loans, both effects compressing our margin.

David Hayes: Our lower gain on sale margin primarily reflected interest rate volatility and product mix shift. The geopolitical environment created a sharp increase in interest rates during Q1. We originated fewer higher margin FHA, VA, and HELOC loans and originated more conventional loans, both effects compressing our margin. Higher interest rates during the quarter also generated wider negative fair value marks on our mortgage servicing and trading securities, contributing to lower revenue. Our loan origination volume was $7.7 billion for the quarter, a decrease of 5% from the prior quarter's volume of $8 billion. This was at the high end of our guidance we issued last quarter of between $6.75 billion and $7.75 billion. Closed loan volume also represented a market share increase demonstrating the success of investing in increasing our loan officers.

Speaker #4: Higher interest rates during the quarter also generated wider negative fair value marks on our mortgage servicing and trade and securities, contributing to lower revenue.

Speaker #4: Our loan origination volume was 7.7 billion dollars for the quarter, a decrease of 5% from the prior quarter's volume of 8 billion. This was at the high end of our guidance we issued last quarter of between 6.75 billion dollars and 7.75 billion dollars.

Speaker #4: Closed loan volume also represented a market share increase demonstrating the success of investing in increasing our loan officers. Servicing fee income decreased from $113 million in the fourth quarter of 2025 to $109 million in the first quarter, and primarily due to lower interest earnings from lower custodial balances along with fewer days in the quarter.

David Hayes: Servicing fee income decreased from $113 million in Q4 2025 to $109 million in Q1, primarily due to lower interest earnings from lower custodial balances along with fewer days in the quarter. Despite the lower servicing revenue, we are able to increase our market leading recapture rate to 73% from the prior quarter's 71%. We hedge our servicing portfolio, we do not report the full impact of the changes in fair value in the results of our operations. We believe this strategy helps protect against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, we adjust our hedge positions in reaction to the changing interest rate environments.

Speaker #4: Despite the lower servicing revenue, we're able to increase our market-leading recapture rate to 73% from the prior quarter's 71%. We hedge our servicing portfolio so we do not record the full impact of the changes in fair value and the results of our operations.

Speaker #4: We believe this strategy helps protect 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 the changing interest rate environments.

Speaker #4: Our total expenses for the first quarter decreased by $565,000 from the prior quarter. We guided to higher expenses during the quarter but ended up delivering a decrease.

David Hayes: Our total expenses for Q1 decreased by $565,000 from the prior quarter. We guided to higher expenses during the quarter, but ended up delivering a decrease. The primary drivers of the decrease were lower commissions due to the impact of implementing a more efficient commission strategies and lower marketing expenses, as I previously discussed. Salary related expenses increased due to higher headcount as we build capacity and the impact from seasonal employment tax resets. We also experienced higher direct origination expenses as vendors increased the cost of credit reporting services. We believe that process and workflow improvements underway should mitigate some of the increased credit reporting costs going forward.

Speaker #4: The primary drivers of the decrease were lower commissions due to the impact of implementing a more efficient commission strategies and lower marketing expenses as I previously discussed.

Speaker #4: Salary-related expenses increased due to higher headcount as we build capacity and the impact from seasonal employment tax resets. We also experienced higher direct origination expenses as vendors increased the cost of credit reporting services.

Speaker #4: We believe that process and workflow improvements underway should mitigate some of the increased credit reporting costs going forward. Looking ahead to the second quarter, we expect pull-through weighted lock volume of between 5.75 billion dollars and 7.75 billion dollars and origination volume of between 7.25 billion dollars and 9.25 billion dollars.

David Hayes: Looking ahead to Q2, we expect pull-through weighted lock volume of between $5.75 billion and $7.75 billion, and origination volume of between $7.25 billion and $9.25 billion. These ranges reflect a shift in mix as our five by five home loan product ramps up, which has a very fast funding profile and which volume is not reflected in the lock volume, but is reflected in the closed loan volume. We expect our Q2 pull-through weighted gain on sale margin to be between 330 and 360 basis points. When evaluating our margin guidance, keep in mind that HELOC products are originated without an interest rate lock. Therefore, our guidance reflects the expected revenue contribution of those products in the numerator, but expected volume is not included in the denominator.

Speaker #4: These ranges reflect a shift in mix as our 5x5 home loan product ramps up, which has a very fast funding profile and which volume is not reflected in the lock volume but is reflected in the closed loan volume.

Speaker #4: We expect our second quarter pull-through weighted gain on sale margin to be between $330 and $360 basis points. When evaluating our margin guidance, keep in mind that HELOC products are originated without an interest rate lock.

Speaker #4: Therefore, our guidance reflects the expected revenue contribution of those products in the numerator but expected volume is not included in the denominator. They also generally carry a higher gain on sale margin but lower average loan balances and combined with leveraging the figure underwriting platform have a lower cost structure.

David Hayes: They also generally carry a higher gain on sale margin but lower average loan balances, and combined with leveraging the Figure underwriting platform, have a lower cost structure. Taken together, we believe the partnership will have a positive impact on our bottom line and a meaningful contributor to growth going forward. Our total expenses are expected to increase in Q2, primarily driven by higher volume-related costs, reflecting higher expected originations quarter-over-quarter. We ended the quarter with $277 million in cash, decreasing by $60 million from Q4, reflecting our net loss, the investment in servicing rights, and timing differences related to our MSR secured loans. Anthony Hsieh stated this earlier, but it bears repeating.

Speaker #4: Taken together, we believe the partnership will have a positive impact on our bottom line and a meaningful contributor to growth going forward. Our total expenses are expected to increase in the second quarter primarily driven by higher volume-related costs reflecting higher expected originations quarter over quarter.

Speaker #4: We ended the quarter with $277 million in cash, decreasing by $60 million from the fourth quarter reflecting our net loss, the investment in servicing rights, and timing differences related to our MSR secured borrowings.

Speaker #4: Anthony stated this earlier, but it bears repeating. Our goals are to continue investing and driving top-line and market share growth, reducing our costs and increasing operating leverage, and applying automation and technology across the origination and servicing business to achieve consistent profitability in any environment.

David Hayes: Our goals are to continue investing in driving top line and market share growth, reducing our costs and increasing operating leverage, and applying automation and technology across the origination and servicing business to achieve consistent profitability in any environment. With that, we're ready to turn it back over to the operator for Q&A. Operator?

Speaker #4: With that, we're ready to turn it back over to the operator for Q&A. Operator?

Speaker #3: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand.

Operator: We will now begin the question-and-answer session. Your first question comes from the line of Mihir Bhatia with Bank of America. Your line is open.

Speaker #3: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Mehir Bhatia with Bank of America.

Speaker #3: Your line is open.

Mihir Bhatia: Hi. Thank you for taking my question. I wanted to start maybe with just the gain on sale margin guide. You have a reasonable step up in the guide between from the Q1's 271 BPS level. Can you just talk about some of the factors that are driving that?

Speaker #4: Hi. Thank you for taking my question. I wanted to start maybe with just gain on sale margin guide. You have a reasonable step up in the guide between from the first quarter's 271 bips level.

Speaker #4: Can you just talk about some of the factors that are driving that?

Speaker #5: Yeah, sure. David Hayes. It's really reflective of a couple of things. But first and foremost, it's the introduction of our 5x5 product, which is a HELOC product.

David Hayes: Yeah, sure. David Hayes. It's really reflective of a couple things, but first and foremost, it's the introduction of our Five by Five product, which is a HELOC product. That carries a much stronger gain on sale margin with it. With the recent partnership with Figure, we've really started to ramp that production. We're seeing a higher percentage mix of volume coming from that product, which is averaging up our gain on sale margin. Additionally, on the first trust deed side of the house, we saw, you know, product mix shift that diluted our margin in Q1, and we're starting to see that shift back towards FHA, VA, and overall higher home equity volumes, which is also contributing to a higher gain on sale margin.

Speaker #5: That carries a much stronger gain on sale margin with it. And with the recent partnership with Figure, we've really started to ramp that production, so we're seeing a higher percentage mix of volume coming from that product, which is averaging up our gain on sale margin.

Speaker #5: Additionally, on the first trustee side of the house, we saw product mix shift that diluted our margin in the first quarter, and we're starting to see that shift back towards FHA VA and overall higher home equity volumes, which is also contributing to a higher gain on sale margin.

Mihir Bhatia: Got it. Okay. Just on the volume and pull-through dynamics, I think there's a, you know, weighted locks, I think in Q1 are $8 billion. You're obviously guiding to some good funded originations here in Q2 with the locks. For Q1, it's like $5.75 to $7.7 billion, like a little bit smaller than Q1. Are you making changes in your pull-through fallout or assumptions? Is something else happening there? Is this just every year seasonality from Q1 to Q2?

Speaker #4: Got it. Okay. And then just on the volume and pull-through dynamics, I think there's a weighted lock setting in one queue of 8 billion.

Speaker #4: You obviously guiding to some good funded originations here in two queue with the locks for one queue is like 5.75 to 7.7, like a little bit smaller than first quarter.

Speaker #4: Are you making changes in your pull-through fallout or assumptions? Is something else happening there, or is this just every year seasonality from one to two queue?

Speaker #5: No, this is kind of a pretty significant shift. They commented on the prepared remarks where with the ramping of this new 5x5 product, it's a HELOC, and there's it.

David Hayes: No, this is kind of a pretty significant shift. I commented on the prepared remarks where with the ramping of this new five by five product, it's a HELOC, and there's no lock associated with it. Instead, when you look at our lock guidance there, that volume is not represented there. It is represented.

Speaker #5: So instead, when you look at our lock guidance, that volume is not represented there. It is represented in our funded volume. And so you'll see where our lock volume came down is because all that volume is showing up in funded volume.

Mihir Bhatia: Okay.

David Hayes: in our funded volume.

Mihir Bhatia: Got it.

David Hayes: -where our lock volume came down is because all that volume is showing up in funded volume. It's a very quick turn time on that.

David Hayes: -where our lock volume came down is because all that volume is showing up in funded volume. It's a very quick turn time on that. You know, app to fund is very quick. There is no lock associated with it.

Speaker #5: It's a very quick turn time on that. So the time from app to fund is very quick. But there is no lock associated with it.

David Hayes: you know, app to fund is very quick. There is no lock associated with it.

Speaker #4: So there's no major change quarter over quarter in the base mortgage business. The changes are happening in the home equity business. Is that the right understanding?

Mihir Bhatia: There's no major change quarter-over-quarter in the base mortgage business. The changes are happening in the home equity business. Is that the right understanding?

David Hayes: Correct. We view the changes.

Speaker #4: The changes are happening because of.

Mihir Bhatia: The changes are happening because of.

David Hayes: Yeah. Let me be clear.

Speaker #5: Similarly, to be clear.

Mihir Bhatia: Yeah.

Speaker #4: Yeah.

Speaker #5: It's the product mix shift between a higher percentage of an expectation of a higher percentage of HELOCs versus first trustees.

David Hayes: It's the product mix shift between a higher-

Mihir Bhatia: Got it.

David Hayes: An expectation of higher percentage of HELOCs versus first trust deeds.

Speaker #6: Yeah. And this is Anthony Shea. I just want to chime in and add my two cents to what David described. It's not only a difference in how we measure revenue because the HELOC loan is not locked.

Anthony Hsieh: Yeah. This is Anthony Hsieh. I just want to chime in and add my two cents to what David described. It's not only a difference in how we measure revenue because the HELOC loan is not locked.

Speaker #6: However, the bigger difference is that a locked loan, the normal cycle is around 25 to 33 days until you recognize the funding of that loan.

Anthony Hsieh: The bigger difference is that a locked loan, the normal cycle is around 25 to 33 days until you recognize the funding of that loan. Our five by five product is funding in 5 to 7 calendar days. It's a very fast process because it utilizes technology to fund loans and process loans. Ultimately, it's going to drive down our cost to produce. It does change the pull-through as you look at it from the traditional way because we're not, we're not publishing the origination on these HELOC five by five loans.

Speaker #6: Our 5x5 product is funding in 5 to 7 calendar days. So it's a very fast process because it utilizes technology to fund loans and process loans.

Speaker #6: So ultimately, it's going to drive down our cost to produce but it does change the pull-through as you look at it from the traditional way because we're not publishing the origination on these HELOC 5x5 loans.

Speaker #4: Got it. Sorry, can I squeeze one more in just on the recapture rate and refinance volume? Obviously, pretty volatile quarter from interest rates. Wondering what you saw happen was there differences between what recapture rate and competitive intensity looked like in Jan, February versus maybe March, April?

Mihir Bhatia: Got it. Sorry, can I squeeze one more in just on the recapture rate and refinance volume? Obviously, a pretty volatile quarter from interest rates. Wondering what you saw happen? Was there differences between what recapture rate and competitive intensity look like in Jan, February versus maybe March, April? Any comments just quarter to date also on that? I'll jump back in queue. Thank you.

Speaker #4: Any comments just quarter to date also on that? Then I'll jump back into you. Thank you.

Speaker #6: I didn't understand that question. I'm sorry.

Anthony Hsieh: I didn't understand that question. I'm sorry.

David Hayes: Uh, I think-

Speaker #5: I think.

Mihir Bhatia: Oh, sorry. I'm just wondering if there was any differences. Yeah. Just intra-quarter dynamics between competitive intensity and recaptures, just given the movement in interest rates.

Mihir Bhatia: Oh, sorry. I'm just wondering if there was any differences.

Speaker #4: Oh, sorry. I was just wondering if there was any differences.

Speaker #6: Yeah. Just intra-quarter dynamics between both recapture rate, between competitive intensity, and recaptures, just given the movement in interest rates.

Anthony Hsieh: Yeah.

Mihir Bhatia: Just intra-quarter dynamics between competitive intensity and recaptures, just given the movement in interest rates.

Speaker #5: No, we didn't see anything really different in recapture behavior and performance.

Anthony Hsieh: No, we didn't see anything really different in recapture behavior and performance.

David Hayes: No, we didn't see anything really different in recapture behavior and performance.

David Hayes: Okay. Thank you.

Mihir Bhatia: Okay. Thank you.

Speaker #4: Okay. Thank you.

Speaker #6: Thank you.

Anthony Hsieh: Thank you.

Speaker #3: Our next question comes from Mikhail Goberman with Citizens JMP. Your line is open.

Operator: Our next question comes from Mikhail Goberman with Citizens JMP. Your line is open.

Speaker #7: Hey, good afternoon, gentlemen. Thanks for taking the question. If I could get some color on how you guys see the mix between origination income and servicing fee income going forward.

Mikhail Goberman: Hey, good afternoon, gentlemen. Thanks for taking the question. If I could get some color on how you guys see the mix between origination income and servicing fee income going forward. Also separately, to what extent do you guys think, or not, that a substantial decline in mortgage interest rates is needed to get a sort of a run rate of earnings that starts to trend in the right direction? Thank you.

Speaker #7: extent do you guys think or not that a substantial decline in mortgage interest rates is needed to get a sort of a run rate of earnings that starts to trend in the right direction?

Speaker #7: Thank you.

Speaker #6: Yeah. So I'll take the second question and perhaps, David, you can take the first question, the blend between servicing income and origination income. So it's been a solid three quarters since we have redirected and started to rebuild the organization.

Anthony Hsieh: I'll take the second question and perhaps, David, you can take the first question, the blend between servicing income and origination income. You know, it's been a solid 3 quarters since we have redirected and started to rebuild the organization. Of course, if yield was at 4.0 today on the 10-year, the environment here would be substantially different. However, understanding that we're at 4.4 to 4.5, we are still quite bullish based on all the hard work that we have done. We have shown tremendous progress in market share, top-line revenue growth, and more meaningfully is our efficiency in marketing. As we drive top of the funnel leads, our ability to convert mid-funnel and conversion to originations, that has changed in a meaningful way over the last 3 quarters.

Speaker #6: And of course, if yield was at 4.0 today on the 10-year, the environment here would be substantially different. However, understanding that we're at 4.4 to 4.5, we are still quite bullish based on all the hard work that we have done we have shown tremendous progress in market share, top-line revenue growth, and more meaningfully is our efficiency in marketing.

Speaker #6: As we drive top-of-the-funnel leads our ability to convert mid-funnel and conversion to originations that has changed in a meaningful way over the last three quarters.

Speaker #6: So as long as we continue and we have every reason to believe that we will continue to drive that positive momentum, and that really is the roots of this organization.

Anthony Hsieh: As long as we continue, and we have every reason to believe that we will continue to drive that positive momentum. That really is the roots of this organization, and that is pro-producing lead flow at the top of the funnel and converting it in a best-in-class within the industry for us to scale and have profitable market share growth. That's exactly what we did from 2010 to 2022. We are resuming a playbook that has worked for decades. It just is gonna take some time in order for us to build all the mechanics, the tools, the measuring, the monitoring, as well as personnel management. We're well on our way in doing that.

Speaker #6: And that is producing lead flow at the top of the funnel and converting it in a best-in-class within the industry for us to scale and have profitable market share growth.

Speaker #6: That's exactly what we did from 2010 to 2022. So we are resuming a playbook that has worked for decades. It just is going to take some time in order for us to build all the mechanics, the tools, the measuring, the monitoring, as well as personnel management.

Speaker #6: And we're well on our way in doing that.

Speaker #5: Yeah. And I'll just add from sort of the mix question around servicing revenue relative to mortgage revenue, I would say obviously, the servicing revenue will be a function of rates and runoff.

David Hayes: Yeah. I'll just add from sort of the mix question around servicing revenue relative to mortgage revenue. I would say, you know, obviously, the servicing revenue will be a function of rates and runoff. Generally speaking, I would expect that to grow quarter-over-quarter by a couple percentage points. We really think that the opportunity lies on the mortgage revenue side. We're heavily investing in loan officer additions across both the direct and retail side of the house. By virtue of that, we think that we should be able to grow mortgage revenue quarter-to-quarter from where we sit today, coupled with sort of the, you know, the seasonality of the business for Q2 and Q3.

Speaker #5: But generally speaking, I would expect that to grow quarter over quarter by a couple of percentage points. We really think that the opportunity lies on the mortgage revenue side.

Speaker #5: We're heavily investing in loan officer additions across both the direct and retail side of the house. And by virtue of that, we think that we should be able to grow mortgage revenue.

Speaker #5: Quarter to quarter, from where we sit today, coupled with sort of the seasonality of the business for a second and third quarters.

Speaker #4: Right. Fantastic caller. Thank you, guys. If I could just squeeze in one more as well, just curious about the liability side of your balance sheet.

Mikhail Goberman: Great. Fantastic cover. Thank you, guys. If I could just squeeze in one more as well. Just curious about the liability side of your balance sheet. Your thoughts on addressing upcoming debt maturities. Thanks.

Speaker #4: Your thoughts on addressing upcoming debt maturities? Thanks.

Speaker #5: Sure. Yeah. Popular question. That is something that the management team and the board is very actively engaged in with discussions with bankers. So we are looking at strategies to address that in a pretty comprehensive way.

David Hayes: Sure. Yeah, popular question. That is something that the management team and the board is very actively engaged in, and with discussions with bankers. We are looking at strategies to address that in a pretty comprehensive way. You know, the markets are quite turbulent, as you well know, right now, and so, we are trying to be very thoughtful about how we approach that. We were hoping to have a resolution on that in the coming months.

Speaker #5: We the markets are quite turbulent as you well know right now. And so we are trying to be very thoughtful about how we approach that.

Speaker #5: But we were hoping to have a resolution on that in the coming months.

Speaker #4: Thank you all. Best of luck going forward.

Mikhail Goberman: Thank you, all. Best of luck going forward.

Speaker #5: Thank you.

David Hayes: Thank you.

Speaker #6: Thank you.

Anthony Hsieh: Thank you.

Speaker #3: There are no further questions at this time. Anthony Hsieh, I turn the call back over to you.

Operator: There are no further questions at this time. Anthony Hsieh, I turn the call back over to you.

Anthony Hsieh: Thank you. On behalf of Dave, Jeff, Don, and the rest of our team, I want to thank you for joining us today. The pieces are in place. We are executing on our strategy to compete at the highest levels by returning to our core strength. Our strategy rests on four objectives. 1. Investing in the business through growth, operational efficiency, and infrastructure. 2. Becoming a best-in-class mortgage banker or in other words, find another loan, close it faster, produce it cheaper, and maintain superior loan quality. 3. Growing profitable market share by hiring and training sales professionals in each of our channels, and by increasing our channel and distribution capabilities. We plan to grow our origination capacity to capture profitable market share growth across refinance, resale, and new home loans.

Speaker #6: Thank you. On behalf of Dave, Jeff, Don, and the rest of our team, I wanted to thank you for joining us today. The pieces are in place.

Speaker #6: We are executing on our strategy to compete at the highest levels by returning to our core strength. Our strategy rests on four objectives. One, investing in the business through growth, operational efficiency, and infrastructure.

Speaker #6: Two, becoming a best-in-class mortgage banker or, in other words, find another loan, close it faster, reduce it cheaper, and maintain superior loan quality. Three, growing profitable market share, by hiring and training sales professionals in each of our channels and by increasing our channel and distribution capabilities.

Speaker #6: We plan to grow our origination capacity to capture profitable market share growth across refinance, resale, and new home loans. And finally, four, returning to profitability.

Anthony Hsieh: Finally, four, returning to profitability by investing in our origination and new customer acquisition capabilities, growing our servicing portfolio, improving our recapture rates, growing our brand and marketing, and increasing our operating leverage. We believe we can return to consistent profitability. This is how we win. Executing these objectives positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape. Thanks again, everybody, and I appreciate your support. Operator.

Speaker #6: By investing in our origination and new customer acquisition capabilities, growing our servicing portfolio, improving our recapture rates, growing our brand and marketing, and increasing our operating leverage.

Speaker #6: We believe we can return to consistent profitability. This is how we went. Executing these objectives, positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape.

Speaker #6: So thanks again, everybody. And I appreciate your support. Operator?

Operator: This concludes today's conference call. You may now disconnect.