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What changed in loanDepot, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of loanDepot, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+523 added−519 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-15)

Top changes in loanDepot, Inc.'s 2024 10-K

523 paragraphs added · 519 removed · 392 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

33 edited+16 added−11 removed40 unchanged
Biggest changeThe MBA reported a 29% decline in U.S. annual one-to-four family residential mortgage origination volume from $2.3 trillion in 2022 to $1.6 trillion in 2023, with a 54% decrease in refinance activity. As of December 2023, the MBA forecasts a 22% increase in annual one-to-four family residential mortgage origination projecting to reach $2.0 trillion by the end of 2024.
Biggest changeIn February 2025, the MBA forecast a 16% increase in U.S. annual one-to-four family residential mortgage origination volume from $1.8 trillion in 2024 to $2.1 trillion in 2025, with a 30% increase in refinance activity.
Statutes, regulations and policies that affect mortgage lending and servicing are continually under review by Congress and state legislatures and federal and state regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have a material effect on our business.
Statutes, regulations and policies that affect mortgage lending and servicing are continually under review by Congress, state legislatures and federal and state regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have a material effect on our business.
In particular, we are required to comply with: • Title V of the GLBA and Regulation P, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession; • the Fair Debt Collection Practices Act (“FDCPA”) and Regulation F, which regulates the timing and content of communications on debt collections; • the TILA and Regulation Z, which, in conjunction with the RESPA under the TILA-RESPA Integrated Disclosure Rule, require certain disclosures be made to mortgagors regarding terms of mortgage financing, including but not limited to information designed to promote consumer understanding of the cost of a loan, expressed in terms of an annual percentage rate, and other credit terms including the disclosure of the number, amount and due dates or periods of scheduled repayments; TILA and Regulation Z also include the rules on loan officer compensation, require special disclosures and treatment for certain high-cost loans, require certain disclosures in connection with the servicing, assumption or refinancing of mortgage loans, provide for consumers’ right to rescind loans under certain circumstances, contain rules with respect to the ordering and review of appraisals and interaction with appraisers, and provide rules requiring a determination of the consumer’s ability to repay certain mortgage loans and providing either a safe harbor or rebuttable presumption of compliance for certain qualified mortgage loans; • the FCRA and Regulation V, which collectively regulate the use and reporting of information related to the credit history of consumers and provides a national legal standard for lenders in sharing information with affiliates and certain third parties and in providing firm offers of credit to consumers; • the ECOA and Regulation B, which prohibit discrimination on the basis of age, race and certain other characteristics in the extension of credit and requires that in certain circumstances, creditors provide appraisal-related disclosures and copies of appraisals to borrowers; • the Homeowners Protection Act, which requires the cancellation of mortgage insurance once certain equity levels are reached; • the Home Mortgage Disclosure Act and Regulation C, which require public reporting of certain loan data; • the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; • the SCRA, which provides certain legal protections and relief to members of the military; • RESPA and Regulation X, which governs the actions of servicers related to escrow accounts, servicing transfers, general mortgage servicing and loss mitigation practices, and other customer communications, and prohibits certain practices, such as giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business; • Regulation N (the Mortgage Acts and Practices Advertising Rule), which prohibits deceptive claims in mortgage advertising and other commercial communications; • Regulation AB under the Securities Act, which requires registration, reporting and disclosure for MBS; • the Secure and Fair Enforcement for Mortgage Licensing Act, commonly known as the SAFE Act, which is designed to enhance consumer protection and reduce fraud by requiring states to establish minimum standards for the licensing and registration of state licensed mortgage loan originators; 8 • the CCPA, which provides California consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers, as well as other state privacy laws; • the Telephone Consumer Protection Act, which prohibits telemarketers, banks, debt collectors, and other companies from using an automatic dialer or robocalls to call people either at home or on their cell phones without their consent; • Dodd-Frank Act provisions prohibiting unfair, deceptive or abusive acts or practices; and • certain other provisions of the Dodd-Frank Act, which, as discussed elsewhere, is extensive in scope and authorizes the CFPB to engage in rulemaking activity and to enforce compliance with federal consumer financial laws, including TILA, RESPA, and the FDCPA.
In particular, we are required to comply with: • Title V of the GLBA and Regulation P, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession; • the Fair Debt Collection Practices Act (“FDCPA”) and Regulation F, which regulates the timing and content of communications on debt collections; • the TILA and Regulation Z, which, in conjunction with the RESPA under the TILA-RESPA Integrated Disclosure Rule, require certain disclosures be made to mortgagors regarding terms of mortgage financing, including but not limited to information designed to promote consumer understanding of the cost of a loan, expressed in terms of an annual percentage rate, and other credit terms including the disclosure of the number, amount and due dates or periods of scheduled repayments; TILA and Regulation Z also include the rules on loan officer compensation, require special disclosures and treatment for certain high-cost loans, require certain disclosures in connection with the servicing, assumption or refinancing of mortgage loans, provide for consumers’ right to rescind loans under certain circumstances, contain rules with respect to the ordering and review of appraisals and interaction with appraisers, and provide rules requiring a determination of the consumer’s ability to repay certain mortgage loans and providing either a safe harbor or rebuttable presumption of compliance for certain qualified mortgage loans; • the FCRA and Regulation V, which collectively regulate the use and reporting of information related to the credit history of consumers and provides a national legal standard for lenders in sharing information with affiliates and certain third parties and in providing firm offers of credit to consumers; • the ECOA and Regulation B, which prohibit discrimination on the basis of age, race and certain other characteristics in the extension of credit and requires that in certain circumstances, creditors provide appraisal-related disclosures and copies of appraisals to borrowers; • the Homeowners Protection Act, which requires the cancellation of mortgage insurance once certain equity levels are reached; • the Home Mortgage Disclosure Act and Regulation C, which require public reporting of certain loan data; • the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; • the SCRA, which provides certain legal protections and relief to members of the military; • RESPA and Regulation X, which governs the actions of servicers related to escrow accounts, servicing transfers, general mortgage servicing and loss mitigation practices, and other customer communications, and prohibits certain practices, such as giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business; • Regulation N (the Mortgage Acts and Practices Advertising Rule), which prohibits deceptive claims in mortgage advertising and other commercial communications; • Regulation AB under the Securities Act, which requires registration, reporting and disclosure for MBS; • the Secure and Fair Enforcement for Mortgage Licensing Act, commonly known as the SAFE Act, which is designed to enhance consumer protection and reduce fraud by requiring states to establish minimum standards for the licensing and registration of state licensed mortgage loan originators; • the CCPA, which provides California consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers, as well as other state privacy laws; • the Telephone Consumer Protection Act, which prohibits telemarketers, banks, debt collectors, and other companies from using an automatic dialer or robocalls to call people either at home or on their cell phones without their consent; • Dodd-Frank Act provisions prohibiting unfair, deceptive or abusive acts or practices; and 9 Table of Contents • certain other provisions of the Dodd-Frank Act, which, as discussed elsewhere, is extensive in scope and authorizes the CFPB to engage in rulemaking activity and to enforce compliance with federal consumer financial laws, including TILA, RESPA, and the FDCPA.
In-Market Loan Officers: We originate loans through dedicated in-market loan officers nationwide, who build and maintain local customer relationships with real estate agents and builders and are often supplemented by leads developed from 4 our enterprise wide marketing. Our technology platform serves as a lead generation tool for these loan officers, particularly focusing on purchase originations.
In-Market Loan Officers: We originate loans through dedicated in-market loan officers nationwide, who build and maintain local customer relationships with real estate agents and builders and are often supplemented by leads developed from our enterprise wide marketing. Our technology platform serves as a lead generation tool for these loan officers, particularly focusing on purchase originations.
We define organic refinance consumer direct recapture rate as the total UPB of loans in our servicing book that are paid in full for purposes of refinancing the loan on the same property, with the Company acting as lender on both the existing and new loan, number divided by the UPB of loans in our servicing book that are paid in full for the purpose of refinancing the loan on the same property.
We define organic refinance, consumer-direct recapture rate as the total UPB of loans in our servicing book that are paid in full for purposes of refinancing the loan on the same property, with the Company acting as lender on both the existing and new loan, divided by the UPB of loans in our servicing book that are paid in full for the purpose of refinancing the loan on the same property.
We are also subject to an extensive framework of state laws in the jurisdictions in which we do business, and to periodic audits and examinations conducted by the state regulators to ensure compliance with those laws.
We are also subject to an extensive framework of state laws and regulations in the jurisdictions in which we do business, and to periodic audits and examinations conducted by the state regulators to ensure compliance with those laws and regulations.
The U.S. federal, state and local laws, rules and regulations to which we are subject, among other things: • limit certain practices related to loan officer compensation; • impose licensing obligations and financial requirements on us; • limit the interest rates, finance charges and other fees that we may charge or pay; • regulate the use of credit reports and the reporting of credit information; • impose underwriting requirements; • mandate disclosures and notices to consumers; 7 • mandate maintenance and retention of loan records; • mandate the collection and reporting of statistical data regarding applications for, originations of and purchases of mortgage loans; • regulate any direct consumer marketing techniques and practices; • require us to safeguard public and non-public information about our customers and regulate the sharing of such non-public personal information with third parties and affiliates; • regulate our privacy and cybersecurity obligations; • regulate our servicing practices, including but not limited to collection and foreclosure practices, the manner and timing for responding to consumer complaints, and the administration of escrow accounts; • require us to take precautions against money-laundering and doing business with certain government-designated parties, such as suspected terrorists and parties engaged in narcotics trafficking; • regulate the method by which appraisals are ordered and reviewed and our interaction with appraisers; and • mandate the terms and conditions under which we must offer and approve loan modification programs for our servicing customers.
The U.S. federal, state and local laws, rules and regulations to which we are subject, among other things: • limit certain practices related to loan officer compensation; • impose licensing obligations and financial requirements; • limit the interest rates, finance charges and other fees that we may charge or pay; • regulate the use of credit reports and the reporting of credit information; • impose underwriting requirements; • mandate disclosures and notices to consumers; • mandate maintenance and retention of loan records; • mandate the collection and reporting of statistical data regarding applications for, originations of and purchases of mortgage loans; • regulate any direct consumer marketing techniques and practices; • require us to safeguard public and non-public information about our customers and regulate the sharing of such non-public personal information with third parties and affiliates; 8 Table of Contents • regulate our privacy and cybersecurity obligations; • regulate our servicing practices, including but not limited to collection and foreclosure practices, the manner and timing for responding to consumer complaints, and the administration of escrow accounts; • require us to take precautions against money-laundering and doing business with certain government-designated parties, such as suspected terrorists and parties engaged in narcotics trafficking; • regulate the method by which appraisals are ordered and reviewed and our interaction with appraisers; and • mandate the terms and conditions under which we must offer and approve loan modification programs for our servicing customers.
Failure of residential loan originators or servicers to comply with these laws, to the extent any of their residential loans are or become part of our mortgaged-related assets, could subject us, as a servicer or as an assignee or purchaser, in the case of acquired loans, to monetary penalties and could result in the borrowers rescinding the affected residential loans.
Failure of residential loan originators or servicers to comply with these laws, to the extent any of their residential loans are or become part of our mortgaged-related assets, could subject us, as an originator, servicer, or as an assignee or purchaser, in the case of acquired loans, to monetary penalties and could result in the borrowers rescinding the affected residential loans.
Market Considerations During 2022 and 2023, the U.S. residential mortgage market experienced the impact of geopolitical risks and inflation, leading the Federal Reserve to raise interest rates and transition from a low-rate to a rising-rate environment. In July 2023, the Federal Reserve increased the Federal Funds rate to a range of 5.25% - 5.50%.
Market Considerations During 2023 and 2024, the U.S. residential mortgage market experienced the impact of geopolitical risks and inflation, leading the Federal Reserve to raise interest rates and transition from a low-rate to a rising-rate environment. In July 2023, the Federal Reserve increased the Federal Funds rate to a range of 5.25% - 5.50%.
Federal, State and Local Regulation Our business is highly regulated. Regulatory and legal requirements are subject to change and may become more restrictive, making our compliance more complex or expensive or otherwise restricting our ability to conduct our business as it is now conducted.
Federal, State and Local Regulation Our business is highly regulated. Regulatory and legal requirements are subject to change and may become more restrictive, making our compliance with these requirements more complex or expensive, or otherwise restricting our ability to conduct our business as it is now conducted.
We have increased our originations market share from 1.0% in 2014 to 1.4% for the year ended December 31, 2023 1 and we believe our strong consumer brand and proprietary technology platform have positioned us to continue gaining additional share.
We have increased our originations market share from 1.0% in 2014 to 1.4% for the year ended December 31, 2024 1 and we believe our strong consumer brand and proprietary technology platform have positioned us to continue gaining additional share.
Our dedicated capital markets team actively manages the pooling and sale of loans into the secondary market as well as hedging of the Company’s whole-loans, origination pipeline, and MSRs. Liquidity is crucial to the overall success of our business and is primarily managed by our treasury and capital markets teams.
Our dedicated capital markets team actively manages the pooling and sale of loans into the secondary market as well as hedging of the Company’s whole-loans, origination pipeline, and MSRs. 6 Table of Contents Liquidity is crucial to the overall success of our business and is primarily managed by our treasury and capital markets teams.
Our risk management objectives include an effective and scalable environment and resource and process optimization, anticipation and mitigation of emerging risks, consistent application of risk framework principles, maintaining satisfactory positions with regulatory agencies, investors, lenders and other critical counterparties, maintaining adequate capital to satisfy our internal, regulatory and agency 5 requirements, holding adequate liquidity to fund our business through both normal and stressed environments, mitigating credit risk exposure, and managing towards attractive long-term risk-adjusted returns on capital.
Our risk management objectives include an effective and scalable environment and resource and process optimization; anticipation and mitigation of emerging risks; consistent application of risk framework principles; maintenance of satisfactory positions with regulatory agencies, investors, lenders and other critical counterparties; maintenance of adequate capital to satisfy our internal, regulatory and agency requirements; holding adequate liquidity to fund our business through both normal and stressed environments; mitigation of credit risk exposure; and management towards attractive long-term risk-adjusted returns on capital.
VA loans are federal assistance residential mortgage loans for eligible U.S. veterans and their surviving spouses that are guaranteed against default by the U.S. government. iv) Home equity lines of credit: we originate home equity lines of credit that are designed to provide homeowners access to efficient capital by accessing the equity that borrowers have accumulated in their homes.
VA loans are federal assistance residential mortgage loans for eligible U.S. veterans and their surviving spouses that are guaranteed against default by the U.S. government. iv) Home equity lines of credit and closed-end second liens: we originate home equity lines of credit and closed-end second liens that are designed to provide homeowners access to efficient capital by accessing the equity that borrowers have accumulated in their homes.
Our servicing portfolio is comprised of 65% Agency MSRs associated with mortgage loans that conform to the guidelines set forth by GSEs, and 28% Government MSRs associated with mortgage loans that are insured or guaranteed by government agencies, primarily through Ginnie Mae mortgage-backed securities. Our servicing portfolio and in-house capabilities complement our loan origination strategy.
Our servicing portfolio is comprised of 56% Agency MSRs associated with mortgage loans that conform to the guidelines set forth by GSEs, and 34% Government MSRs associated with mortgage loans that are insured or guaranteed by government agencies, primarily through Ginnie Mae mortgage-backed securities. Our servicing portfolio and in-house capabilities complement our loan origination strategy.
Unlike origination and sale, servicing revenues are recurring in nature and repeat throughout the life of the underlying mortgage loan. In February 2023, we completed the transition of our servicing portfolio to our in-house platform. For the years ended December 31, 2023 and 2022 we retained servicing rights on 66% and 65% of loans sold, respectively.
Unlike origination and sale, servicing revenues are recurring in nature and repeat throughout the life of the underlying mortgage loan. In February 2023, we completed the transition of our servicing portfolio to our in-house platform. For the years ended December 31, 2024 and 2023, we retained servicing rights on 63% and 66% of loans sold, respectively.
Additionally, we source originations through direct referrals from our partners' customer interactions and user interface. Servicing Servicing involves collecting loan payments, sending principal and interest payments to investors, managing escrow funds for mortgage-related expenses like taxes and insurance, conducting loss mitigation activities on behalf of investors, and administering our mortgage loan servicing portfolio in compliance with state and federal regulations.
Additionally, we source originations through direct referrals from our partners' customer interactions. 5 Table of Contents Servicing Servicing involves collecting loan payments, sending principal and interest payments to investors, managing escrow funds for mortgage-related expenses like taxes and insurance, conducting loss mitigation activities on behalf of investors, and administering our mortgage loan servicing portfolio in compliance with state and federal regulations.
The information found on our website is not a part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. 10
The information found on our website is not a part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. 11 Table of Contents
Available Information loanDepot files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments of such reports with the Securities and Exchange Commission ("SEC"). Any document loanDepot files may be inspected, without charge, at the SEC's website at http://www.sec.gov.
Available Information loanDepot files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports and other required information with the Securities and Exchange Commission ("SEC"). Any document loanDepot files may be inspected, without charge, at the SEC's website at http://www.sec.gov.
Accordingly, we must comply with state licensing requirements in all of the states in which we conduct business. We are licensed as a loan originator in all 50 states and the District of Columbia and also are licensed as a loan servicer and loan broker in a number of states and jurisdictions in which such licenses are required.
Accordingly, we must comply with state licensing requirements in all of the states in which we conduct business. We are licensed as a loan originator in all 50 states and the District of Columbia and also are licensed as a loan servicer and loan broker in states and jurisdictions where we are required to be licensed.
Our preliminary organic refinance consumer direct recapture rate for the year ended December 31, 2023 was 66%.
Our preliminary organic refinance, consumer-direct recapture rate for the year ended December 31, 2024 was 70%.
Intellectual Property As of December 31, 2023, we hold 32 registered United States trademarks and 26 United States trademark applications, including with respect to the name “loanDepot,” “mello” and other logos and various additional designs and word marks relating to the “loanDepot” name, as well as three issued United States patents and 11 United States patent applications.
Intellectual Property As of December 31, 2024, we hold 34 registered United States trademarks and 27 United States trademark applications, including with respect to the name “loanDepot,” “mello” and other logos and various additional designs and word marks relating to the “loanDepot” name, as well as 3 issued United States patents and 14 United States patent applications.
We offer a wide variety of loan products and our in-house servicing platform complements our loan origination strategy. We are the fifth largest retail-focused non-bank mortgage originator and the seventh largest overall retail originator (based on data through February 29, 2024, published by Inside Mortgage Finance).
We offer a wide variety of loan products and our in-house servicing platform complements our loan origination strategy. We are the sixth largest retail-focused non-bank mortgage originator and the eighth largest overall retail originator (based on data through March 13, 2025, published by Inside Mortgage Finance).
Meanwhile, the average rate for a 30-year fixed rate mortgage as reported by the St. Louis Fed continued to increase during the year and peaked in October 2023. The heightened rate environment negatively affected the affordability and loan qualification of homebuyers and decreased demand for refinancing, subsequently influencing mortgage loan origination volumes.
Concurrently, the average rate for a 30-year fixed rate mortgage as reported by the St. Louis Fed increased during this period and peaked in October 2023. The heightened rate environment negatively affected the affordability and loan qualification of homebuyers and decreased demand for refinancing, shrinking mortgage loan origination volumes.
However, our compliance department also works alongside the production areas of our organization on a day-to-day basis, which enables our compliance function and business units to collaborate and work more efficiently.
However, our compliance department also works alongside the production areas of our organization on a day-to-day basis, which enables our compliance function and business units to collaborate and work more efficiently. We regularly and proactively engage with our regulators to stay ahead of regulatory trends.
As of December 31, 2023, we had $660.7 million of cash and cash equivalents, along with $3.1 billion of loan funding capacity across eight credit facilities, of which $1.9 billion was outstanding. Our $3.1 billion loan funding capacity was comprised of maturities staggered throughout 2024.
As of December 31, 2024, we had $421.6 million of cash and cash equivalents, along with $3.7 billion of loan funding capacity across nine credit facilities, of which $2.4 billion was outstanding. Our $3.7 billion loan funding capacity was comprised of maturities staggered throughout 2025 and 2026.
We view our infrastructure and culture of compliance to be a competitive advantage, as it enables us to leverage our platform and rapidly scale our business while minimizing, as much as possible, compliance risk. Supervision and Regulation We describe below the material elements of the regulatory and supervisory framework applicable to us.
We view our infrastructure and culture of compliance to be a competitive advantage, as it enables us to leverage our platform and rapidly scale our business while minimizing, as much as possible, compliance risk. 1 Total market originations based on data as of December 2024, from the Mortgage Bankers Association. 7 Table of Contents Supervision and Regulation We describe below the material elements of the regulatory and supervisory framework applicable to us.
We do not otherwise rely on any registered copyrights or other forms of registered intellectual property. Our other intellectual property rights consist of unregistered copyrights, trade secrets, proprietary know-how and technological innovations that we have developed to maintain our competitive position.
Our other intellectual property rights consist of unregistered copyrights, common law trademarks or servicemarks, trade secrets, proprietary know-how and technological innovations that we have developed to maintain our competitive position.
As of December 31, 2023, we serviced 496,894 customers with $145.1 billion in UPB of residential mortgage loans, 82% of which was associated with FICO scores above 680.
As of December 31, 2024, we serviced 417,875 customers with $116.0 billion in UPB of residential mortgage loans, 79% of which was associated with FICO scores above 680.
Transforming our originations business to drive purchase money transactions with an expanded emphasis on purpose-driven lending; 2. Investing in profitable growth-generating initiatives and critical business platforms and processes to support operating leverage and best-in-class quality and delivery; 3. Aggressively right sizing our cost structure to address current and future projected market conditions; and 4. Optimizing and simplifying our organizational structure.
Investing in profitable growth-generating initiatives and critical business platforms and processes to support operating leverage and best-in-class quality and delivery; 3. Aggressively right sizing our cost structure to address current and future projected market conditions; and 4. Optimizing and simplifying our organizational structure. Vision 2025 was a critical factor in our successful navigation of unprecedented and challenging market conditions.
We are also subject to a variety of regulatory and contractual obligations imposed by the GSEs, Ginnie Mae, the VA, the FHA, and others. Human Capital Our People As of December 31, 2023, we had 4,250 employees, all of whom are based in the United States. As of December 31, 2023, we also employed 1,047 full-time contractors.
We are also subject to a variety of regulatory and contractual obligations imposed by the GSEs, Ginnie Mae, the VA, the FHA, and others. Human Capital Our People. Our success is anchored in the dedication, expertise, and diversity of our workforce. As of December 31, 2024, we had approximately 4,900 employees. Culture and Engagement.
However, existing economic conditions such as market volatility, geopolitical risks, inflation, and uncertainties in the banking sector, contribute to inherent uncertainties in estimates and assumptions. Vision 2025 In response to the challenges posed by these market dynamics, we introduced our Vision 2025 Plan in July 2022, characterized by four key elements: 1.
However, prevailing interest rates and strength of the housing market coupled with existing economic conditions such as market volatility, geopolitical risks, inflation, and uncertainties in the banking sector, contribute to inherent uncertainties in estimates and assumptions.
We regularly and 1 Total market originations based on data as of December 2023, from the Mortgage Bankers Association. 6 proactively engage with our regulators to stay ahead of regulatory trends. In addition, we utilize third-party verification and internal audit procedures to assist with compliance on fundamental issues.
In addition, we utilize third-party verification and internal audit procedures to assist with compliance as appropriate.
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Since the initial announcement, we have made the following strides toward the realization of Vision 2025: • Exited the wholesale channel: We completed our exit of the wholesale channel, reducing operational complexities and focusing our originations business on direct customer engagement. • Established NHC Mortgage Joint Venture: In collaboration with National HomeCorp., loanDepot formed NHC Mortgage, the latest in a series of joint ventures for loanDepot that expand the company's reach in the important purchase mortgage market and its strategic focus on increasing and sustaining homeownership in underserved communities. • Partnered with Habitat for Humanity: As a purpose-driven lender committed to helping more families realize their financial and homeownership goals, loanDepot supports the nonprofit organization on its mission to help Habitat homeowners achieve the strength, stability and independence they need to build a better life for themselves and for their families. 3 • Transitioned Servicing Portfolio: We transitioned our servicing portfolio to an in-house platform, resulting in a reduction in servicing expenses and allowing direct engagement with our customers, improving service levels and our customers’ homeownership experience. • Expanded HELOC Platform: After launching our home equity line of credit (“HELOC”) solution in late 2022, we added additional states, broadening the offering to more customers, enhancing our digital presence and customer engagement, and diversifying our revenue base. • Consolidated Retail and Corporate Locations: We have consolidated our retail and corporate locations, reducing our occupancy related expenses. • Streamlined Leadership Structure: We centralized management of loan originations and loan fulfillment under senior leaders and reduced management spans to enhance quality and effectiveness. • Aligned Cost Structure: We have made significant progress toward aligning our cost structure for improved operational efficiency.
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Actions taken by the Federal Reserve to impact short-term interest rates do not always have a corresponding impact on long-term interest rates, which more significantly influence the price of a fixed-rate mortgages.
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Total expenses decreased $693.4 million, or 35.6%, for the year 2023 compared to 2022. Non-volume related expenses decreased from $1.5 billion in 2022 to $1.0 billion in 2023. This reduction has been primarily achieved through strategic measures such as headcount reduction, attrition, business process optimization, diminished marketing and third-party spending, and the consolidation of real estate assets.
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Despite the Federal Reserve reducing the Federal Funds rate three times in 2024 to a range of 4.25% - 4.50%, the 30-year fixed rate mortgages remained elevated except for a brief period during the third quarter of 2024 when long-term rates decreased somewhat only to return to higher levels in the fourth quarter of 2024.
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We reduced staffing levels to 4,250 at December 31, 2023 from 5,194 at December 31, 2022 and 11,307 at December 31, 2021.
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Vision 2025 and Project North Star In response to the headwinds posed by challenging market dynamics beginning in 2022, we introduced our Vision 2025 Plan in July 2022, characterized by four key elements: 1. Transforming our originations business to drive purchase money transactions with an expanded emphasis on purpose-driven lending; 2.
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In November 2023, we announced an additional $120 million annualized cost reduction target, including $100 million in non-volume related expenses such as vendor contract termination and renegotiation, optimized marketing spending, and corporate real estate cost reductions, that we expect will benefit our 2024 results.
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During the third quarter of 2024 we announced the completion of Vision 2025 and the launch of Project North Star, the Company’s strategic blueprint for the next three years.
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None of our employees are represented by a labor union and we consider our employee relations to be good.
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Project North Star builds on the foundational imperatives of Vision 2025, including our focus on durable revenue growth, positive operating leverage, best in class productivity and investments in platforms and solutions that support and ultimately transform our customers’ homeownership journey. Project North Star is comprised of five initiatives: 4 Table of Contents 1.
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As of December 31, 2023, our workforce was 54.3% female and 45.7% male, and the ethnicity of our workforce was 58.2% White, 18.4% Hispanic or Latino, 9.4% Asian, 9.3% Black or African American, and 4.7% other (which includes American Indian or Alaska Native, Native Hawaiian or Other Pacific Islander, and “Two or More Races”).
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Becoming the lifetime lending partner of choice for homeowners, with an emphasis on first-time home buyers. We plan to develop and launch a unique AI-powered relationship management and engagement platform that allows our customers to optimize their home buying, selling, equity optimization and home management experience. 2.
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Diversity and Inclusion We achieve success by serving a diverse customer base and recruiting employees of all backgrounds and nationalities. We believe diversity in our workforce and an inclusive culture that supports equal opportunities 9 to be essential to our success and remain committed to maintaining such a focus in our hiring and retention efforts.
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Growing our purchase mortgage reach and capabilities through an expanded geographic footprint and partnerships with key industry participants, including realtors and builders, increasing our share of originations 3. Continuing to invest in and scale our servicing portfolio and maintain best-in-class recapture rates. 4.
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In order to successfully achieve these goals we have worked to educate employees and leadership on these essential topics. Our efforts include mandated harassment prevention training for employees and managers that meet the guidelines of various state requirements for states in which we operate.
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Building out our “low touch” automated, data-driven mortgage loan processing workflow to drive operating leverage, quality, and faster turn times. We believe this will support a superior customer experience and ultimately higher revenue by delivering consistent, durable margins and profitability. 5. Becoming the mortgage industry’s employer of choice, by successfully recruiting, developing and retaining the best talent available.
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In addition, all newly hired or promoted managers are invited to manager sessions that incorporate a few of our core values, including ethics and integrity, taking care of our people, and excellence. Training and Development We thoroughly support our people with a significant amount of ongoing education and proficiency resources.
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We intend to continue to simplify our organization, reduce management layers and eliminate unnecessary silos to increase innovation and ownership throughout the Company.
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We also operate in highly regulated areas that are subject to licensing requirements, so we offer a robust onboarding training for existing mortgage professionals who join our team. Additionally, we have developed our own new-to-industry training programs that help us scale production roles at the speed of business needs.
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We are committed to fostering a workplace culture that values and respects the unique perspectives, backgrounds, and talents of every individual in accordance with equal employment opportunities laws. We believe that a workforce with broad perspectives, viewpoints and backgrounds enhances creativity, innovation, and overall business performance.
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This is a complete program that escorts an employee from a starting point in lending to their career as a fully licensed professional.
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Our team members are expected to complete annual training courses focused on promoting respect in the workplace. We also monitor pay equity across multiple dimensions on an annual basis, and we conduct employee surveys on a variety of topics to inform our programs and employee initiatives. Training and Development.
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The training and development of our team members is a crucial driver of our success. In order to provide the best experience for our team members and customers, we provide extensive, best-in-class training for our sales, processing, underwriting, and servicing teams.
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This includes an intensive development program for those who are just starting their career in lending that provides the opportunity to become a fully-licensed professional. 10 Table of Contents We provide all team members with unrestricted access to professional development and leadership courses via our learning management system and support ongoing education through our tuition reimbursement program.
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In addition, our Leadership Academy programs prepare high performing, high potential leaders for roles of greater impact and influence through an immersive curriculum supported by assessments, simulations, and executive coaching. Workshops and Company-sponsored certification programs further contribute to keeping our workforce abreast of industry best practices. Compensation and Rewards.
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We provide comprehensive benefits and well-being programs as well as competitive pay programs that provide employees with the opportunity to earn rewards based on individual, team, and Company performance. Our peer recognition program provides the opportunity for all team members to recognize their peers who demonstrate our core values in their everyday actions.
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This multi-faceted approach underscores our commitment to investing in the development of our team members and enables our ability to attract and retain a highly skilled and engaged workforce.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditional discussion of the risks summarized in this risk factor summary can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock: • We may not achieve some or all of the expected benefits of our Vision 2025 plan and our initiatives may adversely affect our business. • Our loan production volume decreased significantly as a result of certain market factors. • Our ability to execute on our Vision 2025 Plan will depend, among other things, on our ability to maintain an operating platform and management system sufficient to conduct our business. • If new products, services, enhancements or expansions do not achieve sufficient market acceptance or do not result in anticipated efficiencies and revenues, our financial results and competitive position could be harmed. • The success and growth of our business will depend upon our ability to adapt to and implement technological changes. • If we fail to promote and maintain our brands in a cost-effective manner, or if we experience negative publicity, we may lose market share and our revenue may decrease. • We rely on warehouse lines of credit and other sources of capital and liquidity to meet the financing requirements of our business. • Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates. • In-house servicing of loans carries with it increased operational and compliance costs as we become directly responsible for complying with regulatory requirements. • Cyberattacks, information or security breaches and technology disruptions or failures, of ours or of our third-party vendors, could damage our business operations, increase our costs adversely affect our business. • The outcome of legal proceedings to which we are a party. • Our mortgage loan origination revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions, including interest rates levels. • Changing federal, state and local laws, as well as changing regulatory enforcement policies and priorities. • The multi-class structure of our common stock may adversely affect the trading market for our Class A Common Stock and will limit or preclude your ability to influence corporate matters. • The multi-class structure of our common stock results in the Hsieh Stockholders holding a majority of the voting power of our capital stock. • We are a “controlled company” and, as a result, qualify for, and intend to rely on, exemptions from certain corporate governance requirements. • Certain provisions in our certificate of incorporation and our by-laws that may delay or prevent a change of control, and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers. 11 Risks Related to our Business and Strategy We may not achieve some or all of the expected benefits of our Vision 2025 plan and our initiatives may adversely affect our business .
Biggest changeAdditional discussion of the risks summarized in this risk factor summary can be found below and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock: • We may not achieve some or all of the expected benefits of our Project North Star strategic plan. • Our new products, services, enhancements or expansions may not achieve sufficient acceptance or result in anticipated efficiencies and revenues. • We may fail to promote and maintain our brands in a cost-effective manner, or experience negative publicity. • We may not be able to identify or consummate acquisitions or otherwise manage our future growth effectively. • We may not be able to retain loans from customers who refinance. • Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates. • Our models may fail to produce reliable and/or valid results. • Our loan originations may be too geographically concentrated. • We may be required to indemnify the purchasers of loans that we originate (including securitization trusts), or repurchase those loans. • Our collateral for our loan funding facilities may decrease in value and require us to satisfy margin calls. • Our servicing rights are highly volatile assets with continually changing values that my decrease or be inaccurate. • We have liability exposure for the performance of our prior subservicer. • Our in-house servicing of loans carries with it increased operational and compliance costs and risks. • We are required to make servicing advances. • Our counterparties may terminate our servicing rights. • Our servicing rights portfolio may experience unanticipated increased delinquencies and defaults as it ages. • We may incur increased costs and related losses in connection with foreclosure actions. • We rely on our joint ventures and any failures in these relationships could decrease mortgage loan originations. • Our business could be adversely affected by challenges to the MERS System. • Our information about borrowers could be inaccurate, incomplete or misrepresented. • Our underwriting guidelines may not be able to accurately predict the likelihood of defaults. • Our financial statement assumptions and estimates, including those used for fair values, could be incorrect or inaccurate. • Our vendor relationships subject us to a variety of risks and they may failure to adequately provide essential services. • Our risk management policies and procedures may not be effective. 12 Table of Contents • Our business could suffer if we fail to attract and retain a highly skilled workforce, including senior management. • We face litigation and legal proceedings that could have a material adverse effect on us. • We may be impacted by severe weather, wildfires, natural disasters, health crises, terrorists and other catastrophic events. • We may not adequately adapt to and implement technological changes and operate effective and reliable systems. • Our use of artificial intelligence in our business, and challenges with properly managing its use could result in harm. • We are subject to cyberattacks, information or security breaches and technology disruptions or failures. • Our intellectual property and proprietary rights may be inadequate and we may encounter disputes. • Our mortgage loan originations are highly dependent on macroeconomic and U.S. residential real estate market conditions. • Our earnings have been and may be adversely affected by elevated interest rates and other market factors. • Our industry is highly competitive, and we may not compete successfully. • We may experience increases in mortgage loan delinquencies and defaults. • We are vulnerable to adverse developments in the secondary mortgage loan market, including the MBS market. • We operate in a highly regulated industry that is subject to federal, state and local laws that evolve regularly, as well as changing regulatory enforcement policies and priorities. • We depend on the programs of the Agencies and Ginnie Mae and changes could materially alter our business. • We are subject to regulatory investigations and inquiries and may incur fines, penalties and increased costs. • We are subject to state licensing and operational requirements that result in substantial compliance costs. • Our regulators at the federal and state levels are increasingly focused on privacy and information security. • We rely on warehouse lines of credit and other sources of capital and liquidity to meet our financing requirements. • Our indebtedness and other financial obligations may limit our financial and operating activities and our ability to incur additional debt to fund future needs. • We depend on our subsidiaries for cash to fund all of our operations and expenses, including dividend payments, if any. • We are a “controlled company” and rely on exemptions from certain corporate governance requirements.
Factors that we consider in evaluating our reserve for such losses include default expectations, actual and expected investor repurchase demands (influenced by, among other things, current and expected mortgage loan file requests and mortgage loan insurance rescission notices) and appeals success rates (where the investor rescinds the demand based on a cure of the defect or acknowledges that the mortgage loan satisfies the investor’s applicable representations and warranties), reimbursement by third-party originators and projected loss severity.
Factors that we consider in evaluating our reserve for such losses include default expectations, actual and expected investor repurchase demands (influenced by, among other things, current and expected mortgage loan file requests and mortgage loan insurance rescission notices), appeals success rates (where the investor rescinds the demand based on a cure of the defect or acknowledges that the mortgage loan satisfies the investor’s applicable representations and warranties), reimbursement by third-party originators, and projected loss severity.
Additionally, we may not be able to recover amounts from some third parties whom we may seek indemnification or against whom we may assert a loan repurchase demand in connection with a breach of a representation or warranty due to financial difficulties or otherwise.
Additionally, we may not be able to recover amounts from some third parties from whom we may seek indemnification or against whom we may assert a loan repurchase demand in connection with a breach of a representation or warranty due to financial difficulties or otherwise.
Our servicing portfolio is subject to “run off,” meaning that loans serviced by us may be prepaid prior to maturity, refinanced with a loan not serviced by us or liquidated through foreclosure, deed-in-lieu of foreclosure or other liquidation process or repaid through standard amortization of principal.
Our servicing portfolio is subject to “run off,” meaning that loans serviced by us may be prepaid prior to maturity, refinanced with a loan not serviced by us; liquidated through foreclosure, deed-in-lieu of foreclosure or other liquidation process; or repaid through standard amortization of principal.
Our transition from an outsourcing model to the servicing of loans in-house means that we are more directly responsible for complying with guidelines set forth by the Agencies and other investors (including securitization trusts) on whose behalf we service mortgage loans.
Our transition from an outsourcing model to an in-house model for the servicing of loans means that we are more directly responsible for complying with guidelines set forth by the Agencies and other investors (including securitization trusts) on whose behalf we service mortgage loans.
For mortgage loans, during any period in which a borrower is not making payments, we are required under most of our servicing agreements in respect of our servicing rights to advance our own funds to meet contractual principal and interest remittance requirements for investors, pay property taxes and insurance premiums, legal expenses and other protective advances.
For mortgage loans, during any period in which a borrower is not making payments, we are required under most of our servicing agreements in respect of our servicing rights to advance our own funds to meet contractual principal and interest remittance requirements for investors and pay property taxes and insurance premiums, legal expenses and other protective advances.
Accordingly, our estimates may change from time to time and such changes may be material to our consolidated results of operations, and the ultimate settlement of such matters may have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Accordingly, our estimates may change from time to time and such changes may be material to our consolidated results of operations, and the ultimate settlement of such matters may have a material adverse effect on our consolidated financial position, results of operations or cash flows.
We currently rely on all of these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements. The Continuing LLC Members including Mr.
We currently rely on these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements. The Continuing LLC Members including Mr.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or our bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery of the State of Delaware (or if the Court of Chancery of the State of Delaware lacks jurisdiction, any other state court of the State of Delaware, or if no state court of the State of Delaware has jurisdiction, the federal district court for the District of Delaware), unless we consent in writing to the selection of an alternative forum.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery of the State of Delaware (or if the Court of Chancery of the State of Delaware lacks jurisdiction, any other state court of the State of Delaware, or if no state court of the State of Delaware has jurisdiction, the federal district court for the District of Delaware), unless we consent in writing to the selection of an alternative forum.
These anti-takeover provisions could substantially impede the ability of stockholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our Class A Common Stock and your ability to realize any potential change of control premium. Item 1B. Unresolved Staff Comments None.
These anti-takeover provisions could substantially impede the ability of stockholders to benefit from a change in control or change in our management and board of directors and, as a result, may adversely affect the market price of our Class A Common Stock and your ability to realize any potential change of control premium. Item 1B. Unresolved Staff Comments None.
While our contracts vary, they generally contain provisions that require us to indemnify these parties, or repurchase these mortgage loans, if: 17 • our representations and warranties concerning mortgage loan quality and mortgage loan characteristics are inaccurate or are otherwise breached and not remedied within any applicable cure period (usually 90 days or less) after we receive notice of the breach; • we fail to secure adequate mortgage insurance within a certain period after closing of the applicable mortgage loan; • a mortgage insurance provider denies coverage; • if the borrower defaults on the on the loan payments within a contractually defined period (early payment default); or • the mortgage loans fail to comply with underwriting or regulatory requirements.
While our contracts vary, they generally contain provisions that require us to indemnify these parties, or repurchase these mortgage loans, if: • our representations and warranties concerning mortgage loan quality and mortgage loan characteristics are inaccurate or are otherwise breached and not remedied within any applicable cure period (usually 90 days or less) after we receive notice of the breach; • we fail to secure adequate mortgage insurance within a certain period after closing of the applicable mortgage loan; • a mortgage insurance provider denies coverage; • if the borrower defaults on the loan payments within a contractually defined period (early payment default); or • the mortgage loans fail to comply with underwriting or regulatory requirements.
These provisions: 49 • provide for a multi-class structure with high vote/low vote until the applicable sunset; • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws; • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors by requiring that removal be “for cause”; • make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with us for a three-year period; • prohibit stockholders from calling special meetings of stockholders; and • require the approval of holders of at least 66 2⁄3% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation.
These provisions: • provide for a multi-class structure with high vote/low vote until the applicable sunset; • authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws; 49 Table of Contents • establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; • establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors by requiring that removal be “for cause”; • make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with us for a three-year period; • prohibit stockholders from calling special meetings of stockholders; and • require the approval of holders of at least 66 2⁄3% of the outstanding shares of our voting common stock to amend the amended and restated bylaws and certain provisions of the amended and restated certificate of incorporation.
Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Warehouse Lines and Debt Obligations.” Our ability to extend or renew existing warehouse lines, secured credit and other debt facilities, as well as obtain new warehouse lines, secured credit and other debt facilities is affected by a variety of factors including: 40 • limitations imposed on us under our warehouse lines, secured credit facilities, and other debt agreements, including restrictive covenants and borrowing conditions, which limit our ability to raise additional debt and require that we maintain certain financial results, including minimum tangible net worth, minimum liquidity, minimum pre-tax net income, minimum debt service coverage ratio, and maximum total liabilities to tangible net worth ratio as well as require us to maintain warehouse lines with third-party lenders; • changes in financial covenants mandated by lenders, which we may not be able to achieve; • any decrease in liquidity in the credit markets; • potential valuation changes to our mortgage loans, servicing rights or other collateral; • prevailing interest rates; • the strength of the lenders from whom we borrow, and the regulatory environment in which they operate, including proposed capital strengthening requirements; • our ability to sell our products to the Agencies; • lenders seeking to reduce their exposure to residential loans due to other reasons, including a change in such lender’s strategic plan or lines of business; and • accounting changes that may impact calculations of covenants in our warehouse lines and other debt agreements which result in our ability to continue to satisfy such covenants.
Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources—Warehouse and Other Lines of Credit and Debt Obligations.” Our ability to extend or renew existing warehouse lines, secured credit and other debt facilities, as well as obtain new warehouse lines, secured credit and other debt facilities is affected by a variety of factors including: • limitations imposed on us under our warehouse lines, secured credit facilities, and other debt agreements, including restrictive covenants and borrowing conditions, which limit our ability to raise additional debt and require that we maintain certain financial results, including minimum tangible net worth, minimum liquidity, minimum pre-tax net income, minimum debt service coverage ratio, and maximum total liabilities to tangible net worth ratio as well as require us to maintain warehouse lines with third-party lenders; • changes in financial covenants mandated by lenders, which we may not be able to achieve; • any decrease in liquidity in the credit markets; • potential valuation changes to our mortgage loans, servicing rights or other collateral; • prevailing interest rates; • the strength of the lenders from whom we borrow, and the regulatory environment in which they operate, including proposed capital strengthening requirements; • our ability to sell our products to the Agencies; • lenders seeking to reduce their exposure to residential loans due to other reasons, including a change in such lender’s strategic plan or lines of business; and 40 Table of Contents • accounting changes that may impact calculations of covenants in our warehouse lines and other debt agreements which result in our ability to continue to satisfy such covenants.
There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable 45 agreement, and/or (ii) distributions to us by LD Holdings are not sufficient to permit us to make payments under the tax receivable agreement after it has paid its taxes and other obligations.
There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement, and/or (ii) distributions to us by LD Holdings are not sufficient to permit us to make payments under the tax receivable agreement after it has paid its taxes and other obligations.
In addition, we are subject to periodic examinations by state and other regulators in the jurisdictions in which we conduct business, which can result in increases in our administrative costs and refunds to borrowers or consumers of certain 36 fees earned by us, and we may be required to pay substantial penalties imposed by those regulators due to compliance errors, or we may lose our license or our ability to do business in the jurisdiction otherwise may be impaired.
In addition, we are subject to periodic examinations by state and other regulators in the jurisdictions in which we conduct business, which can result in increases in our administrative costs and refunds to borrowers or consumers of certain fees earned by us, and we may be required to pay substantial penalties imposed by those regulators due to compliance errors, or we may lose our license or our ability to do business in the jurisdiction otherwise may be impaired.
See “Business— Supervision and regulation.” The continued focus of regulators on the practices of the loan origination and servicing industry have resulted and could continue to result in new enforcement actions that could directly or indirectly affect the manner in which we conduct our business and increase the costs of defending and settling any such matters, which could impact our reputation and/or results of operations.
See “Business— Supervision and regulation.” The continued focus of regulators on the practices of the loan origination and servicing industry have resulted and could continue to result in new enforcement actions that could directly or indirectly affect the manner in which we conduct our business and increase the costs of defending and settling any such matters, which could adversely impact our reputation and/or results of operations.
Separately, the 39 TCPA requires telemarketers to maintain an internal DNC list and a policy adhering to “do-not-call” registry requirements which, in part, mandate callers to refrain from making unsolicited marketing calls to consumers who have listed their numbers on the National Do Not Call Registry, absent an inquiry or established business or personal relationship.
Separately, the TCPA requires telemarketers to maintain an internal DNC list and a policy adhering to “do-not-call” registry requirements which, in part, mandate callers to refrain from making unsolicited marketing calls to consumers who have listed their numbers on the National Do Not Call Registry, absent an inquiry or established business or personal relationship.
Additionally, the obligation to make a lump sum payment on a change of control may deter potential acquirers, which could negatively affect our stockholders’ potential returns. See Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.” for further information.
Additionally, the obligation to make a lump sum payment on a change of control may deter potential acquirers, which could negatively affect our stockholders’ potential returns. See Note 1-Description of Business and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.” for further information.
Under FCC rulings and regulations “prior express consent” must be in writing if the call contains an advertisement or constitutes telemarketing. In December 2023, the FCC recently promulgated a rule requiring that such consent be obtained on behalf of each calling party individually (which previously could have been obtained on behalf of multiple calling parties simultaneously).
Under FCC rulings and regulations “prior express consent” must be in writing if the call contains an advertisement or constitutes telemarketing. In December 2023, the FCC promulgated a rule requiring that such consent be obtained on behalf of each calling party individually (which previously could have been obtained on behalf of multiple calling parties simultaneously).
See “—Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.” These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our result of operations.
See “Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.” These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact our result of operations.
A significant change in these guidelines that has the effect of decreasing the fees we charge or requires us to 33 expend additional resources in providing mortgage loan services could decrease our revenues or increase our costs, which would adversely affect our business, financial condition and results of operations.
A significant change in these guidelines that has the effect of decreasing the fees we charge or requires us to expend additional resources in providing mortgage loan services could decrease our revenues or increase our costs, which would adversely affect our business, financial condition and results of operations.
Any 48 such determination will depend on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, including the satisfaction of our obligations under the tax receivable agreement, restrictions in our debt agreements, business prospects and other factors that our Board of Directors may deem relevant.
Any such determination will depend on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, including the satisfaction of our obligations under the tax receivable agreement, restrictions in our debt agreements, business prospects and other factors that our Board of Directors may deem relevant.
Moreover, our hedging strategies may not be effective in mitigating the risks related to changes in interest rates and could affect our profitability and financial condition. Poorly designed strategies or improperly executed transactions could increase our risk and losses. 16 We rely on internal models to manage risk and to make business decisions.
Moreover, our hedging strategies may not be effective in mitigating the risks related to changes in interest rates and could affect our profitability and financial condition. Poorly designed strategies or improperly executed transactions could increase our risk and losses. We rely on internal models to manage risk and to make business decisions.
If the anticipated value of such incentives does not materialize because of volatility or lack of positive performance in our stock price, or if our total compensation package is not viewed as being competitive, our ability to attract and retain the personnel we need to operate could be adversely affected.
If the anticipated value of such incentives does not materialize because of volatility or lack of positive performance in our stock price or otherwise, or if our total compensation package is not viewed as being competitive, our ability to attract and retain the personnel we need to operate could be adversely affected.
Additionally, we can provide no assurance that we will be able to develop, commercially market and achieve acceptance of our new and recently launched products. Our investment of resources to develop new products may either be insufficient or result in expenses that are excessive in light of revenue actually originated from these new products.
Additionally, we can provide no assurance that we will be able to develop, commercially market and achieve acceptance of our new and recently launched products. Our investment of resources to develop new products and services may either be insufficient or result in expenses that are excessive in light of revenue actually originated from these new products.
Hsieh and his affiliates (the “Hsieh Stockholders”) hold their ownership interests in our business through LD Holdings and their interests may conflict with yours in the future. 43 Prior to the IPO, we completed a reorganization by changing our equity structure to create a single class of LLC Units in LD Holdings (the “Reorganization”).
Hsieh and his affiliates (the “Hsieh Stockholders”) hold their ownership interests in our business through LD Holdings and their interests may conflict with yours in the future. Prior to our IPO, we completed a reorganization by changing our equity structure to create a single class of LLC Units in LD Holdings (the “Reorganization”).
The federal government has 35 also brought actions against lenders asserting that they submitted claims for FHA-insured loans that the lender falsely certified to HUD met FHA underwriting requirements that resulted in FHA paying out millions of dollars in insurance claims to cover the defaulted loans. See “Item 1.
The federal government has also brought actions against lenders asserting that they submitted claims for FHA-insured loans that the lender falsely certified to HUD met FHA underwriting requirements that resulted in FHA paying out millions of dollars in insurance claims to cover the defaulted loans. See “Item 1.
The CFPB has also taken the position that it has authority under the Consumer Financial Protection Act to identify, prohibit and prosecute discrimination as an unfair, deceptive, or abusive act or practice to target discriminatory conduct, even where fair lending laws, such as ECOA, may not apply.
The CFPB has taken the position that it has authority under the Consumer Financial Protection Act to identify, prohibit and prosecute discrimination as an unfair, deceptive, or abusive act or practice to target discriminatory conduct, even where fair lending laws, such as ECOA, may not apply.
The financial services industry as a whole is characterized by rapidly changing technologies and we are dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact.
The financial services industry as a whole is characterized by rapidly changing technologies and we are dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact and engage.
Our business could be adversely affected if those models fail to produce reliable and/or valid results. We make significant use of business and financial models in connection with our proprietary technology to measure and monitor our risk exposures and to manage our business.
Our business could be adversely affected if those models fail to produce reliable and/or valid results. We make significant use of business and financial models in connection with our technology to measure and monitor our risk exposures and to manage our business.
In light of the inherent uncertainties involved in litigation and other legal proceedings, it is not always possible to determine a reasonable estimate of the amount of a probable 23 loss, and we may estimate a range of possible loss for consideration in its estimates.
In light of the inherent uncertainties involved in litigation and other legal proceedings, it is not always possible to determine a reasonable estimate of the amount of a probable loss, and we may estimate a range of possible loss for consideration in its estimates.
Business—Supervision and regulation—Supervision and enforcement” and the risk factor captioned “—We are subject to regulatory investigations and inquiries and may incur fines, penalties and increased costs that could negatively impact our future liquidity, financial position and results of operations or damage our reputation.” Because these actions carry the possibility for treble damages, many have resulted in settlements totaling in the hundreds of millions of dollars, as well as required lenders and servicers to make significant changes in their practices.
Business—Supervision and regulation—Supervision and enforcement” and the risk factor captioned “We are subject to regulatory investigations and inquiries and may incur fines, penalties and increased costs that could negatively impact our future liquidity, financial position and results of operations or damage our reputation.” Because these actions carry the possibility for treble damages, many have resulted in settlements totaling in the hundreds of millions of dollars, as well as required lenders and servicers to make significant changes in their practices.
We have established policies and procedures intended to help identify, monitor and manage the types of risk to which we are subject, including market and interest rate risk, liquidity risk, cyber risk, regulatory and legal risk, reputational risk, operational risk, vendor risk, and counterparty risk.
We have established policies and procedures intended to help identify, monitor and manage the types of risk to which we are subject, including market and interest rate risk, liquidity risk, cyber risk, regulatory and compliance risk, legal risk, reputational risk, operational risk, vendor risk, and counterparty risk.
Furthermore, we may be responsible for any legacy 15 liabilities of businesses we acquire, including liabilities resulting from an acquisition target’s controls related to financial reporting, disclosure, and cyber and information security environment.
Furthermore, we may be responsible for any legacy liabilities of businesses we acquire, including liabilities resulting from an acquisition target’s controls related to financial reporting, disclosure, and cyber and information security environment.
As a result, our ability to repay our indebtedness depends on the future performance of our business, which will be affected by financial, business, economic and other factors, many of 42 which we cannot control.
As a result, our ability to repay our indebtedness depends on the future performance of our business, which will be affected by financial, business, economic and other factors, many of which we cannot control.
While we have a practice of seeking to independently verify some of the borrower information that we use in deciding whether to extend credit or to agree to a loan modification, including, depending on the program, employment, assets, income and credit score, not all borrower information is independently verified, and if any of the information that is independently verified (or any other information considered in the loan review process) is misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected.
While we have a practice of seeking to independently verify some of the borrower information that we use in deciding whether to extend credit or to agree to a loan modification, including, depending on the program, employment, assets, income and credit score, not all borrower information is independently verified, and if any of the information that is independently verified (or any other information considered in the loan review process) is misrepresented intentionally or negligently and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected.
Our underwriting guidelines may not be able to accurately predict the likelihood of defaults on some of the mortgage loans in our portfolio. 22 We originate and sell Agency-eligible and non-Agency-eligible residential mortgage loans.
Our underwriting guidelines may not be able to accurately predict the likelihood of defaults on some of the mortgage loans in our portfolio. We originate and sell Agency-eligible and non-Agency-eligible residential mortgage loans.
Specifically, our high level of debt could have important consequences to the holders of our Class A Common Stock, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, including indebtedness we may incur in the future, thereby reducing the funds available for other purposes; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements, including our ability to obtain short-term credit, including renewing or replacing warehouse lines; • increase our vulnerability to fluctuations in market interest rates, to the extent that the spread we earn between the interest we receive on our LHFS and the interest we pay under our indebtedness is reduced; • increasing our cost of borrowing; • place us at a competitive disadvantage to competitors with relatively less debt in economic downturns, adverse industry conditions or catastrophic external events; or • reduce our flexibility in planning for, or responding to, changing business, industry and economic conditions.
Specifically, our high level of debt could have important consequences, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, including indebtedness we may incur in the future, thereby reducing the funds available for other purposes; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements, including our ability to obtain short-term credit, including renewing or replacing warehouse lines; • increase our vulnerability to fluctuations in market interest rates, to the extent that the spread we earn between the interest we receive on our LHFS and the interest we pay under our indebtedness is reduced; • increasing our cost of borrowing; • place us at a competitive disadvantage to competitors with relatively less debt in economic downturns, adverse industry conditions or catastrophic external events; or • reduce our flexibility in planning for, or responding to, changing business, industry and economic conditions.
As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions.
As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to update or replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions.
We and our third-party vendors may not be able to anticipate or implement effective preventive measures against all cybersecurity incidents, such as security breaches or unauthorized access of our information technology systems or the information technology systems of third-party vendors that receive, process, retain and transmit electronic information on our behalf.
We and our third-party vendors have not been able to, and may not be able to, anticipate or implement effective preventive measures against all cybersecurity incidents, such as security breaches or unauthorized access of our information technology systems or the information technology systems of third-party vendors that receive, process, retain and transmit electronic information on our behalf.
A prolonged economic slowdown, recession or declining real estate values could impair the performance of our investments and harm our financial condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
Any resulting prolonged economic slowdown, recession or declining real estate values could impair the performance of our investments and harm our financial condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
Any alleged violation of applicable wage laws or other labor or employment-related laws could result in complaints by current or former employees, adverse media coverage, investigations and damages or penalties, which could have a materially adverse effect on our reputation, business, operating results and prospects.
Any alleged violation of applicable wage laws or other labor or employment-related laws has resulted and could result in complaints by current or former employees, adverse media coverage, investigations and damages or penalties, which could have a materially adverse effect on our reputation, business, operating results and prospects.
Discontinuation, or significant changes in the roles or practices, of the Agencies, including changes to their guidelines and other proposed reforms, could require us to revise our business models, which could ultimately negatively impact our results of operations. Changes in GSE or Ginnie Mae selling and/or servicing guidelines could adversely affect our business, financial condition and results of operations.
Discontinuation, or significant changes in the roles or practices, of the Agencies, including changes to their guidelines and other proposed reforms, could require us to revise our business models, which could ultimately negatively impact our results of operations. Changes in GSE or Ginnie Mae selling and/or servicing guidelines could adversely affect our business.
Any exclusion from stock indices could result in a less active trading market for our Class A Common Stock. Any actions or publications by proxy advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Stock.
Any exclusion from stock indices, funds, or otherwise could result in a less active trading market for our Class A Common Stock. Any actions or publications by proxy advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Stock.
The Company did not realize any of the cash savings in U.S. federal, state and local tax described above regarding tax basis adjustments and deemed interest deductions in relation to any Class A Common Stock received by the Parthenon Stockholders in the Reorganization Transactions.
The Company did not realize any of the cash savings in U.S. federal, state and local tax described above regarding tax basis adjustments and deemed interest deductions in relation to any Class D Common Stock received by the Parthenon Stockholders in the Reorganization Transactions.
Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our clients or to other third parties that could harm our reputation and increase our operating costs.
Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our customers or to other third parties that could harm our reputation and increase our operating costs.
As a result, large moves and substantial volatility in interest rates materially affect our consolidated financial position, results of operations and cash flows. We employ various economic hedging strategies that utilize derivative instruments to mitigate the interest rate and fall-out risks that are inherent in many of our assets, including our IRLCs, our LHFS and our MSRs.
As a result, large moves and substantial volatility in interest rates materially affect our consolidated financial position, results of operations and cash flows. 16 Table of Contents We employ various economic hedging strategies that utilize derivative instruments to mitigate the interest rate and fall-out risks that are inherent in many of our assets, including our IRLCs, our LHFS and our MSRs.
A substantial portion of our aggregate mortgage loan origination is secured by properties concentrated in the states of California, Texas and Florida, and properties securing a substantial portion of our outstanding UPB of mortgage loan servicing rights portfolio are located in California, Texas, Florida, Virgina, Washington and Arizona.
A substantial portion of our aggregate mortgage loan origination is secured by properties concentrated in the states of California, Texas and Florida, and properties securing a substantial portion of our outstanding UPB of mortgage loan servicing rights portfolio are located in California, Texas, Florida, Virginia, Arizona and Washington.
Institutions that compete with us in this regard may have significantly greater access to capital or resources than we do, which may give them the benefit of a lower cost of operations.
Institutions that compete with us in this regard may have significantly greater access to capital or resources than we do, which may give them the benefit of a lower cost of operations or more efficient operations.
Our access to and our ability to renew our existing warehouse lines ,secured credit and other debt facilities could suffer in the event of: (i) the deterioration in the performance of the mortgage loans underlying the warehouse lines; (ii) our failure to maintain sufficient levels of eligible assets or credit enhancements; (iii) our inability to access the secondary market for mortgage loans (see “—We depend on the programs of the Agencies.
Our access to and our ability to renew our existing warehouse lines, secured credit and other debt facilities could suffer in the event of: (i) the deterioration in the performance of the mortgage loans underlying the warehouse lines; (ii) our failure to maintain sufficient levels of eligible assets or credit enhancements; (iii) our inability to access the secondary market for mortgage loans (see “We depend on the programs of the Agencies.
In addition, the structuring of future transactions may take into consideration these existing unitholders’ tax considerations even where no similar benefit would accrue to us. See Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies “—Income Taxes” of the Notes to Consolidated Financial Statements contained in “Item 8.
In addition, the structuring of future transactions may take into consideration these existing unitholders’ tax considerations even where no similar benefit would accrue to us. See Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies “Income Taxes” of the Notes to Consolidated Financial Statements contained in “Item 8.
Also, increased mortgage loan defaults may ultimately reduce the number of mortgage loans that we service. 30 Increased mortgage loan delinquencies, defaults and foreclosures will also result in a higher cost to service those loans due to the increased time and effort required to collect payments from delinquent borrowers and to liquidate properties or otherwise resolve loan defaults if payment collection is unsuccessful, and only a portion of these increased costs are recoverable under our servicing agreements.
Also, increased mortgage loan defaults may ultimately reduce the number of mortgage loans that we service. 31 Table of Contents Increased mortgage loan delinquencies, defaults and foreclosures will also result in a higher cost to service those loans due to the increased time and effort required to collect payments from delinquent borrowers and to liquidate properties or otherwise resolve loan defaults if payment collection is unsuccessful, and only a portion of these increased costs are recoverable under our servicing agreements.
Our current servicing operations also could be required to address any past servicing concerns on behalf of Cenlar, which also could result in regulatory, operational and litigation risk. In-house servicing of loans carries with it increased operational and compliance costs as we become directly responsible for complying with regulatory requirements.
Our current servicing operations also has addressed, and could be required to continue to address, any past servicing concerns on behalf of Cenlar, which also could result in regulatory, operational and litigation risk. In-house servicing of loans carries with it increased operational and compliance costs as we become directly responsible for complying with regulatory requirements.
Whether a misrepresentation is made by the loan applicant, another third-party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. We may not detect all misrepresented information in our mortgage loan originations or from service providers we engage to assist in the loan approval process.
Whether a misrepresentation is made by the loan applicant, another third-party or one of our employees, we generally bear the risk of loss associated with the misrepresentation. We may not detect all misrepresented information in our mortgage loan originations or from service 22 Table of Contents providers we engage to assist in the loan approval process.
The performance of our prior subservicer to effectively service our portfolio of MSRs, mortgage loans and other loan products, could materially and adversely affect us. On February 1, 2023, we completed the transfer of servicing operations from Cenlar FSB (“Cenlar”) and brought the servicing of all MSRs in-house.
The performance of our prior subservicer to effectively service our portfolio of MSRs, mortgage loans and other loan products, could materially and adversely affect us. On February 1, 2023, we completed the transfer of servicing operations from Cenlar FSB (“Cenlar”) and brought the servicing of all MSRs in-house. Cenlar was our primary subservicer from 2012 to 2023.
Any significant increase in required servicing advances or delinquent loan repurchases, could have a significant adverse impact on our cash flows, even if they are reimbursable, and could also have a detrimental effect on our business and financial condition. Our counterparties may terminate our servicing rights, which could adversely affect our business, financial condition and results of operations.
Any significant increase in required servicing advances or delinquent loan repurchases, could have a significant adverse impact on our cash flows, even if they are reimbursable, and could also have a detrimental effect on our business and financial condition. Our counterparties may terminate our servicing rights, which could adversely affect our business.
Risks Related to Our Intellectual Property We may be unable to sufficiently obtain, maintain, protect and enforce our intellectual property and proprietary rights and we may encounter disputes from time to time relating to our use of the intellectual property of third parties.
We may be unable to sufficiently obtain, maintain, protect and enforce our intellectual property and proprietary rights and we may encounter disputes from time to time relating to our use of the intellectual property of third parties.
For example, the Continuing LLC Members may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, and whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement.
For example, the Continuing LLC Members may have different tax 43 Table of Contents positions from us, which could influence their decisions regarding whether and when to dispose of assets, and whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement.
If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm 47 is unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.
If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm is unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could cause the price of our securities to decline, and we may be subject to investigation or sanctions by the SEC.
Our business in general exposes us to both formal and informal periodic inquiries, from various state and federal agencies as part of those agencies’ oversight of the origination and sale of mortgage loans and servicing activities. See “—Risks related to our regulatory environment” below.
Our business in general exposes us to both formal and informal periodic inquiries, from various state and federal agencies as part of those agencies’ oversight of the origination and sale of mortgage loans and servicing activities. See “Risks related to our regulatory environment” below.
These complexities and significant assumptions could lead to a delay in the preparation of financial information and also increase the risk of errors and restatements, as well as the cost of compliance. Changes in accounting interpretations or assumptions could impact our financial statements and our ability to timely prepare our financial statements.
These complexities and significant assumptions could lead to a delay in the preparation of financial information and also increase the risk of errors and restatements, as well as the cost of compliance. Changes in accounting 23 Table of Contents interpretations or assumptions could impact our financial statements and our ability to timely prepare our financial statements.
Financial Statements and Supplementary Data.” The multi- class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial offering (including the Hsieh Stockholders), who hold 54.7% of the voting power of our capital stock which includes the voting power of equity interests of other directors and officers currently held in vehicles for which Mr.
Financial Statements and Supplementary Data.” The multi- class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial offering (including the Hsieh Stockholders), who hold 51.9% of the voting power of our capital stock which includes the voting power of equity interests of other directors and officers currently held in vehicles for which Mr.
The Parthenon Stockholders, Parthenon affiliates owning Holdco Units and certain of the Continuing LLC Members will receive payments under the tax receivable agreement until such time that they validly assign or otherwise transfer their rights to receive such payments.
The Parthenon Stockholders, Parthenon affiliates owning Holdco Units and certain of the Continuing LLC Members will receive 45 Table of Contents payments under the tax receivable agreement until such time that they validly assign or otherwise transfer their rights to receive such payments.
We intend to cause LDLLC (and the other subsidiaries, if practicable) to make distributions to LD Holdings, and LD Holdings to make distributions to its unitholders in an amount sufficient to cover all applicable taxes payable by them determined according to assumed rates under the Holdings LLC Agreement, payments owing under the tax receivable agreement, and dividends, if any, declared by us.
We intend to cause LDLLC (and the other subsidiaries, if practicable) to make distributions to LD Holdings, and LD Holdings to make tax distributions to its unitholders in an amount sufficient to cover all applicable taxes payable by them determined according to assumed rates under the Holdings LLC Agreement, payments owing under the tax receivable agreement, dividends, if any, declared by us, and our operating capital needs.
If any of our mortgage loans are found to have been originated in violation of predatory or abusive lending laws, we could incur losses, which could adversely impact our results of operations, financial condition and business.
If any of our mortgage loans are found to have been 37 Table of Contents originated in violation of predatory or abusive lending laws, we could incur losses, which could adversely impact our results of operations, financial condition and business.
We have derived substantially all of our revenue from originating, selling and servicing traditional mortgage loans. Efforts to expand into new consumer products, such as HELOCs, insurance, real estate services, or other products consistent with our business purpose, may not succeed and may reduce expected revenue growth.
We have derived substantially all of our revenue from originating, selling and servicing traditional mortgage loans. Efforts to expand into new consumer products, such as HELOCs, closed-end second lien mortgage loans, insurance, real estate services, or other products consistent with our business purpose, may not succeed and may reduce expected revenue growth.
Hsieh exercises sole voting power, and Parthenon Capital Partners (the “Parthenon Stockholders”), who together with the Hsieh Stockholders hold in the aggregate approximately 94.1% of the voting power of our capital stock, which may limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
Hsieh exercises sole voting power, and Parthenon Capital Partners (the “Parthenon Stockholders”), who together with the Hsieh Stockholders hold in the aggregate approximately 92.6% of the voting power of our capital stock, which may limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
The failure on Cenlar’s part to effectively service our portfolio of MSRs in the past could result in residual, regulatory, operational and litigation risk which could adversely impact our business, financial condition, liquidity and results of operations.
The failure on Cenlar’s part to effectively service our portfolio of MSRs in the past has resulted in, and may result in, residual, regulatory, operational and litigation risk, which could adversely impact our business, financial condition, liquidity and results of operations.
We are required to follow specific guidelines that impact the way that we originate and service Agency loans, including guidelines with respect to: • credit standards for mortgage loans; • managing prepayment speeds commensurate with that of our peers; • our staffing levels and other origination and servicing practices; • the fees that we may charge to consumers or pass-through to the Agencies; • our modification standards and procedures; • unanticipated changes to pricing and guarantee fees; • the amount of non-reimbursable advances; and • internal controls such as data privacy and security, compliance, quality control and internal audit.
We are required to follow specific guidelines that impact the way that we originate and service Agency loans, including guidelines with respect to: • credit standards for mortgage loans; • managing prepayment speeds commensurate with that of our peers; • staffing levels and other origination and servicing practices; • fees that we may charge to consumers or pass-through to the Agencies; • modification standards and procedures; • pricing and guarantee fees; • non-reimbursable advances; and 34 Table of Contents • internal controls such as data privacy and security, compliance, quality control and internal audit.
Risks Related to Ownership of Our Class A Common Stock and Public Company Status The market price of our Class A Common Stock may be volatile, which could cause the value of your investment to decline. The market price of our Class A Common Stock may be highly volatile and could be subject to wide fluctuations.
Risks Related to Ownership of Our Class A Common Stock and Public Company Status The market price of our Class A Common Stock may be volatile, which could cause the value of your investment to decline. The market price of our Class A Common Stock has been, and may continue to be, highly volatile and subject to wide fluctuations.
We depend on the programs of the Agencies. Discontinuation, or changes in the roles or practices, of these entities, without comparable private sector substitutes, could materially and negatively affect our results of operations and ability to compete . We sell mortgage loans to various entities, including Fannie Mae and Freddie Mac, which include the mortgage loans in GSE-guaranteed securitizations.
Discontinuation, or changes in the roles or practices, of these entities, without comparable private sector substitutes, could materially and negatively affect our results of operations and ability to compete . We sell mortgage loans to various entities, including Fannie Mae and Freddie Mac, which include the mortgage loans in GSE-guaranteed securitizations.
The Hsieh Stockholders currently hold approximately 54.7% of the voting power of our outstanding capital stock and therefore, for so long as they continue to hold a majority of the voting power, will be able to control all matters submitted to our stockholders for approval (other than items subject to a super majority vote or a separate class vote).
The Hsieh Stockholders currently hold approximately 51.9% of the voting power of our outstanding capital stock and therefore, for so long as they continue to hold a majority of the voting power, will be able to control all matters submitted to our stockholders for approval (other than items subject to a super majority vote or a separate class vote).
We rely on a combination of trademarks, service marks, copyrights, trade secrets, domain names and confidentiality procedures and contractual provisions with employees and third parties to protect our intellectual property and proprietary rights.
We rely on a combination of trademarks, service marks, copyrights, trade secrets, patents, domain names, proprietary know how, and confidentiality procedures and contractual provisions with employees and third parties to protect our intellectual property and proprietary rights.
In addition, the Continuing LLC Members (including the Hsieh Stockholders) own 43.7% of the Holdco Units. Because they hold their ownership interest in our business through LD Holdings, rather than us, these existing unitholders may have conflicting interests with holders of our Class A Common Stock.
In addition, the Continuing LLC Members (including the Hsieh Stockholders) own 38.5% of the Holdco Units. Because they hold their ownership interest in our business through LD Holdings, rather than us, these existing unitholders may have conflicting interests with holders of our Class A Common Stock.
In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly or annual results of operations, additions or departures of key management personnel, changes in our earnings estimates (if provided) or failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or the investment community with respect to us or our industry, adverse announcements by us or others and developments affecting us, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnership, joint ventures or capital commitments, actions by institutional stockholders, increases in market interest rates that may lead investors in our shares to demand a higher yield, and in response the market price of shares of our Class A Common Stock could decreases significantly.
In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our 46 Table of Contents quarterly or annual results of operations; additions or departures of key management personnel; changes in our earnings estimates (if provided) or failure to meet analysts’ earnings estimates; publication of research reports about our industry; litigation and government investigations; changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; adverse market reaction to any indebtedness we may incur or securities we may issue in the future; changes in market valuations of similar companies or speculation in the press or the investment community with respect to us or our industry; adverse announcements by us or others and developments affecting us; announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; actions by institutional stockholders; increases in market interest rates that may lead investors in our shares to demand a higher yield; and other risk factors detailed in this Item 1A, and in response the market price of shares of our Class A Common Stock could decreases significantly.
Furthermore, we also must comply with regulations in connection with doing business and offering loan products over the internet, including various state and federal e-signature rules mandating that certain disclosures be made, and certain steps be followed in order to obtain and authenticate e-signatures.
Furthermore, we also must comply with regulations in connection with doing 38 Table of Contents business and offering loan products over the internet, including various state and federal e-signature rules mandating that certain disclosures be made, and certain steps be followed in order to obtain and authenticate e-signatures.
Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Class A Common Stock.
Preferred shares, if issued, could have a preference with 47 Table of Contents respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Class A Common Stock.
In addition, it may be difficult to compare our business to our mortgage loan originator competitors. Such competitors may have better ability to model delinquency and default risk and may have a better ability than we do in establishing appropriate loss reserves based on their longer operating histories.
In addition, it may be difficult to compare our business to our mortgage loan originator competitors. Such 21 Table of Contents competitors may have better ability to model delinquency and default risk and may have a better ability than we do in establishing appropriate loss reserves based on their longer operating histories.
If a vendor we rely on is unable to provide services expected to us, as a result of their own lack of operational resilience measures, we may experience operational impacts, including business disruption. Our risk management policies and procedures may not be effective.
If a vendor we rely on is unable to provide services to us as expected, as a result of their own lack of operational resilience measures or otherwise, we may experience increased costs and operational impacts, including business disruption. Our risk management policies and procedures may not be effective.
For example, we use models to measure and monitor our exposures to interest rate, credit and other market risks. The information provided by these models is used in making business decisions relating to strategies, initiatives, transactions, pricing and products.
For example, we use models to measure and monitor our exposures to interest rate, credit and other market risks, as well as to make underwriting decisions. The information provided by these models is used in making business decisions relating to strategies, initiatives, transactions, pricing and products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, the Company has been named as a defendant in several lawsuits related to this Cybersecurity Incident, which are seeking various remedies, including monetary and injunctive relief.
Biggest changeWe recognized $24.6 million of expenses related to the Cybersecurity Incident, net of insurance recoveries during fiscal 2024. In addition, we were named, and may still be named, as a defendant in lawsuits related to this Cybersecurity Incident, which are seeking various remedies, including monetary and injunctive relief.
For example, we conduct penetration and vulnerability testing, data recovery testing, security audits, and ongoing risk assessments, including due diligence on and audits of our key technology vendors, CROs, and other contractors and suppliers. We also conduct regular employee training on cyber and information security topics, phishing and simulations.
For example, we conduct penetration and vulnerability testing, data recovery testing, security audits, and ongoing risk assessments, including due diligence on and audits of our key technology vendors, and other contractors and suppliers. We also conduct regular employee training on cyber and information security topics, phishing and simulations.
In addition, we enter into relationships with third-party vendors to assist with various aspects of our business, some of which require the exchange of personal employee or borrower information. The secure maintenance of this information and our information technology systems is important to our operations and business strategy.
In addition, we enter into relationships with third-party vendors to assist with various aspects of our business, some of which require the exchange of personal employee or customer information. The secure maintenance of this information and our information technology systems is important to our operations and business strategy.
Additional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “Cyberattacks, information or security breaches and technology disruptions or failures, including failure of internal operational or security systems or infrastructure, or other cybersecurity incidents of ours or of our third-party vendors, could damage our business operations and increase our costs, which could adversely affect our business, financial condition and results of operations.” The Board of Directors, as a whole and at the committee level, oversees our enterprise risk management program, the most significant risks facing us and our processes to identify, prioritize, assess, manage, and mitigate those risks.
Additional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “Cyberattacks, information or security breaches and technology disruptions or failures, including failure of internal operational or security systems or infrastructure, or other cybersecurity incidents of ours or of our third-party vendors, could damage our business operations and increase our costs.” The Board of Directors, as a whole and at the committee level, oversees our enterprise risk management program, the most significant risks facing us and our processes to identify, prioritize, assess, manage, and mitigate those risks.
Item 1C. Cybersecurity In the ordinary course of our business, we receive, process, retain, transmit and store proprietary information and sensitive or confidential data, including certain public and nonpublic personal information concerning employees and borrowers.
Item 1C. Cybersecurity In the ordinary course of our business, we receive, process, retain, transmit and store proprietary information and sensitive or confidential data, including certain public and nonpublic personal information concerning employees, borrowers and other customers and potential customers.
The Audit Committee, which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit Committee receives quarterly or as needed updates on cybersecurity and information technology matters and related risk exposures from our CISO and Chief Information Officer.
The Audit Committee, which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit Committee receives regularly scheduled and as needed updates on cybersecurity and information technology matters and related risk exposures from our CISO and Chief Information Officer.
The CISO receives regular reports prepared by experienced information security officers on cybersecurity threats, based on data from the Information Security Department and, in conjunction with management, regularly reviews risk management measures implemented by the Company to help identify and mitigate data protection and cybersecurity risks.
The CISO receives regular reports prepared by experienced information security officers on cybersecurity threats, based on data from the Information Security Department and, in conjunction with management, regularly reviews risk management measures implemented by the Company to help identify and mitigate data protection and 50 Table of Contents cybersecurity risks.
While we cannot presently quantify the full scope of expenses and other related impacts associated with this Cybersecurity Incident, including costs associated with any related current or future litigation or regulatory inquiries or investigations, the Company currently does not expect that the cybersecurity incident will have a material effect on its overall financial condition or on its ongoing results of operations.
While we cannot presently quantify the full scope of expenses and other related impacts associated with this Cybersecurity Incident, including costs associated with any related current or future litigation or regulatory inquiries or investigations, we currently do not expect that the Cybersecurity Incident will have a material effect on our overall financial condition or on our ongoing results of operations beyond those amounts already accrued.
While we have identified risks from cybersecurity threats, such risks have not materially affected us, including our business strategy, results of operations or financial condition, with the exception of the Cybersecurity Incident, as disclosed in a Current Report filed by the Company on Form 8-K on January 8, 2024, as amended on January 22, 2024 and February 27, 2024, which the Company believes will have a material impact on the Company’s first quarter 2024 results.
While we have identified risks from cybersecurity threats, such risks have not materially affected us, including our business strategy, results of operations or financial condition, with the exception of the Cybersecurity Incident, as disclosed in a Current Report filed by the Company on Form 8-K on January 8, 2024, as amended on January 22, 2024 and February 27, 2024, and in subsequent filings with the SEC.
In addition, we consult with outside advisors and experts, when appropriate, on a regular basis to assist with assessing, identifying, and managing cybersecurity risks, including to anticipate future threats and trends, and their impact on the Company’s risk environment.
In addition, we consult with outside advisors and experts, when appropriate, on a regular basis to assist with assessing, identifying, and managing cybersecurity risks, including to anticipate future threats and trends, and their impact on the Company’s risk environment. We also utilize a third party for cybersecurity incident monitoring and response.
We also utilize a third party for cybersecurity incident monitoring and response. 50 Our CISO, who reports to the Chief Information Officer and has over twenty years of experience managing information technology and cybersecurity matters, together with our senior leadership team, is responsible for assessing and managing cybersecurity risks.
Our CISO, who reports to the Chief Information Officer and has over twenty years of experience managing information technology and cybersecurity matters, together with our senior leadership team, is responsible for assessing and managing cybersecurity risks.
Removed
As previously disclosed, among other things, the Company expects to record in the first quarter of 2024 approximately $12 to $17 million of expenses related to the Cybersecurity Incident, net of expected insurance recovery.
Added
Further, we have engaged with and continue to engage with regulators related to the Cybersecurity Incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease four additional facilities: one in Scottsdale, Arizona; one in Southfield, Michigan; and two in Plano, Texas. Our Scottsdale location houses operations, technology, and sales teams. Our Southfield location houses sales and support. Our Plano locations include employees from nearly all aspects of our business, including our servicing department.
Biggest changeWe lease four additional facilities: one in Chandler, Arizona; one in Scottsdale, Arizona; one in Southfield, Michigan; and one in Plano, Texas. Our Chandler and Scottsdale locations house operations, technology, and sales teams. Our Southfield location houses sales and support. Our Plano location includes employees from nearly all aspects of our business, including our servicing department.
In addition, we lease over 100 licensed sales office locations in most states across the United States. None of our leases extend beyond 10 years. Refer to Note 9 - Leases in the Notes to Consolidated Financial Statements for further information on our leases.
In addition, we lease over 100 licensed sales office locations in most states across the United States. None of our leases extend beyond 10 years. Refer to Note 10 - Leases in the Notes to Consolidated Financial Statements for further information on our leases.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we and certain of our subsidiaries are involved in various lawsuits in state or federal courts regarding violations of state or federal statutes, regulations or common law related to matters arising out of the ordinary course of business.
Biggest changeItem 3. Legal Proceedings From time to time, we and certain of our subsidiaries are involved in various legal and regulatory matters that arise in connection with the conduct of our business.
For a further discussion of our material legal proceedings, including proceedings related to the Cybersecurity 51 Incident, see Note 19 - Commitments and Contingencies and Note 21 - Subsequent Events of the Notes to Consolidated Financial Statements included in “Item 8 Financial Statements and Supplementary Data.” Item 4. Mine Safety Disclosures Not applicable. 52 PART II.
For a further discussion of our material legal proceedings, see Note 20 - Commitments and Contingencies of the Notes to Consolidated Financial Statements included in “Item 8 Financial Statements and Supplementary Data.” Item 4. Mine Safety Disclosures Not applicable. 51 Table of Contents PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Unregistered Sales of Equity Securities 53 Shares of the Company's Class B common stock or Class C common stock may each be converted, together with a corresponding Holdco Unit, as applicable, at any time and from time to time at the option of the holder of such share of Class B common stock or Class C common stock, as applicable, for one fully paid and non-assessable share of Class A common stock.
Biggest change“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Unregistered Sales of Equity Securities 52 Table of Contents Shares of the Company's Class B common stock or Class C common stock may each be converted, together with a corresponding Holdco Unit, as applicable, at any time and from time to time at the option of the holder of such share of Class B common stock or Class C common stock, as applicable, for one fully paid and non-assessable share of Class A common stock.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. As of March 13, 2024, there were 0 stockholders of record of our Class B common stock.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. As of March 10, 2025, there were 0 stockholders of record of our Class B common stock.
On December 1, 2023, we issued to stockholders 1,697,060 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders Issuer Purchases of Equity Securities None. Item 6. [RESERVED]
On December 1, 2024, we issued to stockholders 115,623 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders Issuer Purchases of Equity Securities None. Item 6. [RESERVED]
Our Class B common stock, Class C common stock, and Class D common stock are neither listed nor traded. Holders As of March 13, 2024, there were 44 stockholders of record of our Class A common stock.
Our Class B common stock, Class C common stock, and Class D common stock are neither listed nor traded. Holders As of March 10, 2025, there were 44 stockholders of record of our Class A common stock.
On October 1, 2023, we issued to stockholders 442,688 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders.
On October 1, 2024, we issued to stockholders 1,941,162 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders.
On November 1, 2023, we issued to stockholders 1,045,755 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders.
On November 1, 2024, we issued to stockholders 5,093,434 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holdco Units held by such stockholders.
As of March 13, 2024, there were 47 stockholders of record of our Class C common stock. As of March 13, 2024, there were 4 stockholders of record of our Class D common stock.
As of March 10, 2025, there were 47 stockholders of record of our Class C common stock. As of March 10, 2025, there were 4 stockholders of record of our Class D common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease in benefit for income taxes of $36.8 million reflects lower net losses, partially offset by non-deductible impairment of goodwill and other intangible assets for the year ended December 31, 2022. 59 Balance Sheet Highlights December 31, Change $ Change % (Dollars in thousands) 2023 2022 ASSETS Cash and cash equivalents $ 660,707 $ 863,956 $ (203,249) (23.5) % Restricted cash 85,149 116,545 (31,396) (26.9) Loans held for sale, at fair value 2,132,880 2,373,427 (240,547) (10.1) Derivative assets, at fair value 93,574 39,411 54,163 137.4 Servicing rights, at fair value 1,999,763 2,037,447 (37,684) (1.8) Trading securities, at fair value 92,901 94,243 (1,342) (1.4) Property and equipment, net 70,809 92,889 (22,080) (23.8) Operating lease right-of-use assets 29,433 35,668 (6,235) (17.5) Loans eligible for repurchase 711,371 634,677 76,694 12.1 Investments in joint ventures 20,363 20,410 (47) (0.2) Other assets 254,098 301,261 (47,163) (15.7) Total assets 6,151,048 6,609,934 (458,886) (6.9) LIABILITIES AND EQUITY Warehouse and other lines of credit 1,947,057 2,146,602 (199,545) (9.3) Accounts payable, accrued expenses and other liabilities 379,971 488,696 (108,725) (22.2) Derivative liabilities, at fair value 84,962 67,492 17,470 25.9 Liability for loans eligible for repurchase 711,371 634,677 76,694 12.1 Operating lease liability 49,192 61,675 (12,483) (20.2) Debt obligations, net 2,274,011 2,289,319 (15,308) (0.7) Total equity 704,484 921,473 (216,989) (23.5) Total liabilities and equity $ 6,151,048 $ 6,609,934 $ (458,886) (6.9) Loans Held for Sale, at Fair Value.
Biggest changeThe $14.4 million or 8.3% increase in other interest expense was the result of the $5.7 million loss on debt extinguishment of the 2025 Senior Notes compared to a $1.7 million gain on debt extinguishment in the prior year, $5.4 million increase related to other secured financings as a result of the loan securitization completed in th e second quarter of 2024, $4.6 million increase primarily related to the amortized discount of $5.6 million on the outstanding 2027 Senior Notes and a higher interest rate on outstanding Senior Notes, and $1.4 million increase related to Term Notes, offset by $4.4 million decrease related to secured credit facilities. 58 Table of Contents Balance Sheet Highlights December 31, 2024 Compared to December 31, 2023 December 31, Change $ Change % (Dollars in thousands) 2024 2023 ASSETS Cash and cash equivalents $ 421,576 $ 660,707 $ (239,131) (36.2) % Restricted cash 105,645 85,149 20,496 24.1 Loans held for sale, at fair value 2,603,735 2,132,880 470,855 22.1 Loans held for investment, at fair value 116,627 — 116,627 N/A Derivative assets, at fair value 44,389 93,574 (49,185) (52.6) Servicing rights, at fair value 1,633,661 1,999,763 (366,102) (18.3) Trading securities, at fair value 87,466 92,901 (5,435) (5.9) Property and equipment, net 61,079 70,809 (9,730) (13.7) Operating lease right-of-use assets 20,432 29,433 (9,001) (30.6) Loans eligible for repurchase 995,398 711,371 284,027 39.9 Investments in joint ventures 18,113 20,363 (2,250) (11.0) Other assets 235,907 254,098 (18,191) (7.2) Total assets 6,344,028 6,151,048 192,980 3.1 LIABILITIES AND EQUITY Warehouse and other lines of credit 2,377,127 1,947,057 430,070 22.1 Accounts payable, accrued expenses and other liabilities 379,439 379,971 (532) (0.1) Derivative liabilities, at fair value 25,060 84,962 (59,902) (70.5) Liability for loans eligible for repurchase 995,398 711,371 284,027 39.9 Operating lease liability 33,190 49,192 (16,002) (32.5) Debt obligations, net 2,027,203 2,274,011 (246,808) (10.9) Total equity 506,611 704,484 (197,873) (28.1) Total liabilities and equity $ 6,344,028 $ 6,151,048 $ 192,980 3.1 Cash and Cash Equivalents.
General and administrative expense includes professional fees, data processing expense, communications expense, and other operating expenses.
General and Administrative Expense . General and administrative expense includes professional fees, data processing expense, communications expense, and other operating expenses.
Adjustments to Diluted Weighted Average Shares Outstanding assumes the pro forma conversion of weighted average Class C shares to Class A common stock.
Adjustments to Diluted Weighted Average Shares Outstanding assumes the pro forma conversion of weighted average Class C common stock to Class A common stock.
Some of these limitations are: • they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments; 64 • Adjusted EBITDA (LBITDA) does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Total Revenue, Adjusted Net Income (Loss), and Adjusted EBITDA (LBITDA) do not reflect any cash requirement for such replacements or improvements; and • they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.
Some of these limitations are: • They do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments; • Adjusted EBITDA (LBITDA) does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt; • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Total Revenue, Adjusted Net Income (Loss), and Adjusted EBITDA (LBITDA) do not reflect any cash requirement for such replacements or improvements; and • They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.
Rising interest rates cause our expected mortgage loan servicing revenues to increase due to a decline in mortgage loan prepayments which extends the average life of our servicing portfolio and increases the value of our servicing rights. Conversely, as interest rates decrease, our LHFS and IRLCs generally increase in value while our Hedging Instruments decrease in value.
Rising interest rates cause our expected mortgage loan servicing revenues to increase due to a decline in mortgage loan prepayments which extends the average life of our servicing portfolio and increases the value of our servicing rights. Conversely, as interest rates decrease, our LHFS, LHFI and IRLCs generally increase in value while our Hedging Instruments decrease in value.
We refer to such forward sales contracts, interest rate swap futures and put options collectively as “Hedging Instruments.” As interest rates increase, our LHFS and IRLCs generally decrease in value while our Hedging Instruments utilized to hedge against interest rate risk typically increase in value.
We refer to such forward sales contracts, interest rate swap futures and put options collectively as “Hedging Instruments.” As interest rates increase, our LHFS, LHFI and IRLCs generally decrease in value while our Hedging Instruments utilized to hedge against interest rate risk typically increase in value.
Net interest income includes interest income earned on LHFS, offset by interest expense incurred on amounts borrowed under warehouse lines for loan financing as well as warehouse line commitment fees. These commitment fees are amortized on a straight-line basis over the duration of the warehouse line agreement.
Revenues Net Interest (Expense) Income. Net interest (expense) income includes interest income earned on LHFS, offset by interest expense incurred on amounts borrowed under warehouse lines for loan financing as well as warehouse line commitment fees. These commitment fees are amortized on a straight-line basis over the duration of the warehouse line agreement.
Change in Fair Value of Servicing Rights, Net . Change in fair value of servicing rights, net include (i) fair value gains or losses net of Hedging Instrument gains or losses; (ii) fallout and decay, which includes principal amortization and prepayments; and (iii) realized gains or losses on the sales of servicing rights.
Change in fair value of servicing rights, net includes (i) fair value gains or losses net of Hedging Instrument gains or losses; (ii) fallout and decay, which includes principal amortization and prepayments; and (iii) realized gains or losses on the sales of servicing rights.
Financial Statements and Supplementary Data.” At December 31, 2023, the most critical of these significant accounting policies were policies related to the fair value of loans held for sale, servicing rights, and derivative financial instruments. As of the date of this report, there have been no significant changes to the Company's critical accounting policies or estimates.
Financial Statements and Supplementary Data.” At December 31, 2024, the most critical of these significant accounting policies were policies related to the fair value of loans held for sale, servicing rights, and derivative financial instruments. As of the date of this report, there have been no significant changes to the Company's critical accounting policies or estimates.
Off-Balance Sheet Arrangements As of December 31, 2023, we were party to mortgage loan participation purchase and sale agreements, pursuant to which we have access to uncommitted facilities that provide liquidity for recently sold MBS up to the MBS settlement date.
Off-Balance Sheet Arrangements As of December 31, 2024, we were party to mortgage loan participation purchase and sale agreements, pursuant to which we have access to uncommitted facilities that provide liquidity for recently sold MBS up to the MBS settlement date.
A comparative discussion of results for 2022 compared to 2021 is provided in the "Results of Operations" section within the Company’s Annual Report of loanDepot, Inc. on Form 10-K for the year ended December 31, 2022.
A comparative discussion of results for 2023 compared to 2022 is provided in the "Results of Operations" section within the Company’s Annual Report of loanDepot, Inc. on Form 10-K for the year ended December 31, 2023.
The sensitivity of servicing rights to various changes in assumptions is also reflected in Note 4 - Servicing Rights, at Fair Value of the Notes to Consolidated Financial Statements included in “Item 8.
The sensitivity of servicing rights to various changes in assumptions is also reflected in Note 5 - Servicing Rights, at Fair Value of the Notes to Consolidated Financial Statements included in “Item 8.
Because of these limitations, Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) are not intended as alternatives to total revenue, net income (loss), net income (loss) attributable to the Company, or Diluted Earnings (Loss) Per Share or as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
Because of these limitations, Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA (LBITDA) are not intended as alternatives to total revenue, net income (loss), net income (loss) attributable to the Company, or Diluted Earnings (Loss) Per Share or as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.
Moreover, there may be reduced demand from investors to acquire our mortgage loans in the secondary market, further impacting our liquidity. Approximately 76% of the mortgage loans that we originated during the year ended December 31, 2023 were sold in the secondary mortgage market either directly to Fannie Mae and Freddie Mac or securitized into MBS guaranteed by Ginnie Mae.
Moreover, there may be reduced demand from investors to acquire our mortgage loans in the secondary market, further impacting our liquidity. Approximately 67% of the mortgage loans that we originated during the year ended December 31, 2024 were sold in the secondary mortgage market either directly to Fannie Mae and Freddie Mac or securitized into MBS guaranteed by Ginnie Mae.
When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Refer to “Item 7A.
When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in 63 Table of Contents conditions and assumptions. Refer to “Item 7A.
Our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization or agreements of our subsidiaries, including agreements governing our indebtedness. Future agreements may also limit our ability to pay dividends.
Our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization or agreements of our subsidiaries, including agreements governing our indebtedness.
This is somewhat offset by purchase loan originations sourced from our joint ventures which typically experience their highest level of activity during November and December as home builders focus on completing and selling homes prior to year- 54 end.
This is somewhat offset by purchase loan originations sourced from our joint ventures which typically experience their highest level of activity during November and December as home builders focus on completing and selling homes prior to year- 53 Table of Contents end.
The majority of our assets are subject to interest rate risk, including LHFS, IRLCs, servicing rights, forward sales contracts, interest rate swap futures and put options.
The majority of our assets are subject to interest rate risk, including LHFS, LHFI, IRLCs, trading securities, servicing rights, forward sales contracts, interest rate swap futures and put options.
(2) Represents the change in the fair value of servicing rights due to changes in valuation inputs or assumptions, net of gains or losses from derivatives hedging servicing rights.
(2) Represents the change in the fair value of servicing rights due to changes in valuation inputs or assumptions, net of gains or losses from derivatives hedging servicing rights, and gains (losses) from the sale of MSRs.
We exclude from these non-GAAP financial measures the change in fair value of MSRs and related hedging gains and losses as they represent non-cash, unrealized adjustments resulting from changes in valuation assumptions, mostly due to changes in market interest rates, and are not indicative of the Company’s operating performance or results of operation.
We exclude from these non-GAAP financial measures the change in fair value of MSRs, gains (losses) from the sale of MSRs, and related hedging gains and losses that represent realized and unrealized adjustments resulting from changes in valuation, mostly due to changes in market interest rates, and are not indicative of the Company’s operating performance or results of operation.
We compensate for these limitations by using Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for a reconciliation of these non-GAAP measures to their most comparable U.S. GAAP measures.
We compensate for these limitations by using Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA 64 Table of Contents (LBITDA) along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for a reconciliation of these non-GAAP measures to their most comparable U.S.
We also sell loans to many private investors. As of December 31, 2023, we maintained revolving lines of credit with eight counterparties providing warehouse and other securitization facilities with a total borrowing capacity of $3.1 billion, of which $901.0 million was committed.
We also sell loans to many private investors. As of December 31, 2024, we maintained revolving lines of credit with nine counterparties providing warehouse and other securitization facilities with a total borrowing capacity of $3.7 billion, of which $951.0 million was committed.
As of December 31, 2023, unrestricted cash and cash equivalents were $660.7 million and committed and uncommitted available capacity under our warehouse and other lines of credit was $1.2 billion.
As of December 31, 2024, unrestricted cash and cash equivalents were $421.6 million and committed and uncommitted available capacity under our warehouse and other lines of credit was $1.2 billion.
The size of servicing advance balances is influenced by delinquency rates and prepayment speeds. As of December 31, 2023, the outstanding balance on our servicing advance facilities was $27.9 million secured by servicing advance receivables totaling $84.5 million.
The size of servicing advance balances is influenced by delinquency rates and prepayment speeds. As of December 31, 2024, the outstanding balance on our servicing advance facilities was $72.5 million secured by servicing advance receivables totaling $76.5 million.
Pull through weighted gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by the pull through weighted rate lock volume.
Gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by loan origination volume during period. 54 Table of Contents Pull through weighted gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by the pull through weighted rate lock volume.
(5) Amounts represent the fair value of servicing rights, net, divided by the weighted average annualized servicing fee. 56 Results of Operations The following table sets forth our consolidated financial statement data for 2023 compared to 2022 .
(5) Amounts represent the fair value of servicing rights, net, divided by the weighted average annualized servicing fee. 55 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table sets forth our consolidated financial statement data for 2024 compared to 2023 .
As of December 31, 2023, we had a total of $7.0 million in restricted cash posted as collateral with our warehouse and securitization facilities, of which $4.3 million was the minimum requirement. Debt Obligations MSR facilities and Term Notes provide financing for our servicing portfolio investments.
As of December 31, 2024, we had a total of $15.6 million in restricted cash posted as collateral with our warehouse and securitization facilities, of which $4.8 million was the minimum requirement. Debt Obligations 61 Table of Contents MSR facilities and Term Notes provide financing for our servicing portfolio investments.
Refer to Note 5- Derivative Financial Instruments and Hedging Activities and Note 19 - Commitments & Contingencies of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” for further discussion on derivatives and other contractual commitments.
Refer to Note 6- Derivative Financial Instruments and Hedging Activities and Note 20 - Commitments & Contingencies of the Notes to Consolidated Financial Statements included in Item 8 for further discussion on derivatives and other contractual commitments.
These facilities, which we refer to as gestation facilities, are a component of our financing strategy and are off-balance sheet arrangements. 63 Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP, which requires us to make judgments, estimates and assumptions that affect: (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenues and expenses during each reporting period.
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP, which requires us to make judgments, estimates and assumptions that affect: (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenues and expenses during each reporting period.
As of December 31, 2023 there were outstanding securities financing facilities of $76.0 million, secured by trading securities with a fair value of $92.9 million. Servicing advance facilities provide financing for our servicing agreements.
As of December 31, 2024 there were outstanding securities financing facilities of $82.5 million, secured by trading securities with a fair value of $87.5 million. Servicing advance facilities provide financing for our servicing agreements.
(2) Represents lease obligations for office space under non-cancelable operating lease agreements. In addition to the above contractual obligations, we also have interest rate lock commitments, forward sale contracts, loan loss obligation for sold loans and obligation for sold MSRs.
In addition to the above contractual obligations, we also have interest rate lock commitments, forward sale contracts, loan loss obligation for sold loans and obligation for sold MSRs.
This was partially offset by stock-based compensation of $22.0 million and an increase to additional paid in capital of $2.8 million, primarily related to deferred taxes. Liquidity and Capital Resources Liquidity Our liquidity reflects our ability to meet current and potential cash requirements. We forecast the need to have adequate liquid funds available to operate and grow our business.
This was partially offset by stock-based compensation of $24.9 million. Liquidity and Capital Resources Liquidity Our liquidity reflects our ability to meet current and potential cash requirements. We forecast the need to have adequate liquid funds available to operate and grow our business.
We enter into IRLCs to originate loans, at specified interest rates, with customers who have applied for a mortgage and meet certain credit and underwriting criteria.
We enter into IRLCs to originate loans, at specified interest rates, with customers who have applied for a mortgage and meet certain credit and underwriting criteria. We believe the volume of our IRLCs is another measure of our overall market share.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 IRLCs $ 32,155,455 $ 68,553,340 $ 166,263,478 IRLCs (units) 105,143 211,647 506,176 Pull through weighted lock volume $ 21,475,262 $ 45,164,915 $ 116,628,597 Pull through weighted gain on sale margin 2.75 1.94 3.07 Loan originations by purpose: Purchase $ 16,474,927 $ 29,333,525 $ 39,321,538 Refinance 6,196,804 24,444,931 97,679,209 Total loan originations $ 22,671,731 $ 53,778,456 $ 137,000,747 Gain on sale margin 2.60 % 1.63 % 2.61 % Loan originations (units) 76,847 161,496 392,737 Licensed loan officers 1,573 1,902 3,373 Loans sold: Servicing-retained $ 15,222,156 $ 38,461,896 $ 117,934,385 Servicing-released 7,918,029 20,855,416 18,148,290 Total loans sold (1) $ 23,140,185 $ 59,317,312 $ 136,082,675 Loans sold (units) 77,372 175,633 392,213 Servicing metrics Total servicing portfolio (unpaid principal balance) $ 145,090,199 $ 141,170,931 $ 162,112,965 Total servicing portfolio (units) 496,894 471,022 524,992 60+ days delinquent ($) (2) $ 1,392,606 $ 1,421,722 $ 1,510,261 60+ days delinquent (%) 0.96 % 1.01 % 0.93 % Servicing rights at fair value, net (3) $ 1,985,718 $ 2,025,136 $ 1,999,402 Weighted average servicing fee (4) 0.29 % 0.30 % 0.29 % Multiple (4)(5) 5.0x 5.2x 4.4x (1) Original principal balance (2) The UPB of loans that are 60 or more days past due as of the dates presented, according to the contractual due date, or are in foreclosure.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 IRLCs $ 32,541,852 $ 32,155,455 $ 68,553,340 IRLCs (units) 110,528 105,143 211,647 Pull-through weighted lock volume $ 22,854,729 $ 21,475,262 $ 45,164,915 Pull-through weighted gain on sale margin 3.17 % 2.75 % 1.94 % Loan originations by purpose: Purchase $ 16,197,535 $ 16,474,927 $ 29,333,525 Refinance 8,298,965 6,196,804 24,444,931 Total loan originations $ 24,496,500 $ 22,671,731 $ 53,778,456 Gain on sale margin 2.96 % 2.60 % 1.63 % Loan originations (units) 84,328 76,847 161,496 Licensed loan officers 1,728 1,573 1,902 Loans sold: Servicing-retained $ 15,238,250 $ 15,222,156 $ 38,461,896 Servicing-released 8,771,900 7,918,029 20,855,416 Total loans sold (1) $ 24,010,150 $ 23,140,185 $ 59,317,312 Loans sold (units) 82,672 77,372 175,633 Servicing metrics Total servicing portfolio (unpaid principal balance) $ 115,971,984 $ 145,090,199 $ 141,170,931 Total servicing portfolio (units) 417,875 496,894 471,022 60+ days delinquent ($) (2) $ 1,826,105 $ 1,392,606 $ 1,421,722 60+ days delinquent (%) 1.57 % 0.96 % 1.01 % Servicing rights at fair value, net (3) $ 1,615,510 $ 1,985,718 $ 2,025,136 Weighted average servicing fee (4) 0.30 % 0.29 % 0.30 % Multiple (4)(5) 4.9x 5.0x 5.2x (1) Original principal balance (2) The UPB of loans that are 60 or more days past due as of the dates presented, according to the contractual due date, or are in foreclosure.
Simultaneously, there is an agreement in place where the counterparties commit to transferring the loans back to us, either at the date the loans are sold or upon our request, and we provide the funds in return. We do not recognize these transfers as sales for accounting purposes.
Under these facilities, we transfer specific loans to our counterparties and receive funds from them. Simultaneously, there is an agreement in place where the counterparties commit to transferring the loans back to us, either at the date the loans are sold or upon our request, and we provide the funds in return.
Direct origination expense reflects the unreimbursed portion of direct out-of-pocket expenses that we incur in the loan origination process, including underwriting, appraisal, credit report, loan document and other expenses paid to non-affiliates. The $53.7 million or 44.4% decrease in direct origination expense was the result of decreased loan originations during the period. General and Administrative Expense .
Direct origination expense reflects the unreimbursed portion of direct out-of-pocket expenses that we incur in the loan origination process, including underwriting, appraisal, credit report, loan document and other expenses paid to non-affiliates. The $17.1 million or 25.5% increase in direct origination expense was the result of increased credit reporting pricing industry-wide and an increase in loan originations during the period.
Adjustments to the benefit (provision) for income taxes reflect the income tax rates below, and the pro forma assumption that loanDepot, Inc. owns 100% of LD Holdings. 65 Year Ended December 31, 2023 2022 2021 Statutory U.S. federal income tax rate 21.00 % 21.00 % 21.00 % State and local income taxes (net of federal benefit) 5.22 6.37 5.00 Combined federal and state rate (less federal benefit) 26.22 % 27.37 % 26.00 % (3) Represents the change in the fair value of servicing rights due to changes in valuation inputs or assumptions, net of gains or losses from derivatives hedging servicing rights.
Year Ended December 31, 2024 2023 2022 Statutory U.S. federal income tax rate 21.00 % 21.00 % 21.00 % State and local income taxes (net of federal benefit) 4.17 5.22 6.37 Effective income tax rate 25.17 % 26.22 % 27.37 % (3) Represents the change in the fair value of servicing rights due to changes in valuation inputs or assumptions, net of gains or losses from derivatives hedging servicing rights, and gains (losses) from the sale of MSRs.
These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share (if dilutive), and Adjusted EBITDA (LBITDA).
These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Weighted Average Shares Outstanding, and Adjusted EBITDA (LBITDA).
As of December 31, 2023, we were in compliance with these financial requirements. 61 FHFA also requires an annual capital and liquidity plan effective March 31, 2024 and Ginnie Mae is implementing a risk-based capital requirement effective December 31, 2024.
FHFA also requires an annual capital and liquidity plan effective March 31, 2024 and Ginnie Mae has implemented a risk-based capital requirement effective December 31, 2024. As of December 31, 2024, we were in compliance with these financial requirements. Warehouse and Other Lines of Credit We primarily finance mortgage loans through borrowings under our warehouse and other lines of credit.
Unsecured debt obligations as of December 31, 2023 consisted of Senior Notes totaling $1.0 billion net of $7.8 million of deferred financing costs. Periodically, and in accordance with applicable laws and regulations, we may take actions to reduce or repurchase our debt. These actions can include redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately-negotiated transactions.
Periodically, and in accordance with applicable laws and regulations, we may take actions to reduce or repurchase our debt. These actions can include redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately-negotiated transactions.
Debt obligations are further discussed in Note 12- Debt Obligations of the Notes to Consolidated Financial Statements contained in Item 8. Dividends and Distributions As part of our balance sheet and capital management strategies, we suspended our regular quarterly dividend effective March 31, 2022 and for the foreseeable future.
Dividends and Distributions As part of our balance sheet and capital management strategies, we suspended our regular quarterly dividend effective March 31, 2022 and for the foreseeable future.
As of December 31, 2023, we had 4,250 employees, as compared to 5,194 employees as of December 31, 2022. Marketing and Advertising Expense. The $103.9 million or 43.9% decrease in marketing expense reflects cost savings measures affecting lead aggregators. With the elevated interest rates, we adapted our marketing strategy to target increased purchase and cash-out refinance volume.
As of December 31, 2024, we had 4,675 employees, as compared to 4,250 employees as of December 31, 2023. Marketing and Advertising Expense. With elevated interest rates, we adapted our marketing strategy to target increased purchase and cash-out refinance volume.
At this time, we currently believe that our cash on hand, as well as the sources of liquidity described above, will be sufficient to maintain our current operations and fund our loan originations capital commitments for the next twelve months.
At this time, we currently believe that our cash on hand, as well as the sources of liquidity described above, will be sufficient to maintain our current operations and fund our loan originations capital commitments for the next twelve months. 60 Table of Contents However, we will continue to review our liquidity needs in light of current and anticipated mortgage market conditions and we are taking various steps to align our cost structure with current and expected mortgage origination volumes.
The decision on amount of debt to be reduced or repurchased depends 62 on several factors, including market conditions, trading levels of our debt, our cash positions, compliance with debt covenants, and other relevant considerations. During 2023, we repurchased $5.4 million of Senior Notes at 67.5% of par which resulted in a $1.7 million gain on extinguishment of debt.
The decision on amount of debt to be reduced or repurchased depends on several factors, including market conditions, trading levels of our debt, our cash positions, compliance with debt covenants, and other relevant considerations.
The $37.7 million, or 1.8%, decrease comprised a $180.7 million reduction from the sale of $181.8 million in UPB and $149.2 million from principal amortization and prepayments, partially offset by $277.4 million of capitalized servicing rights from servicing-retained loan sales, and an increase in fair value. Warehouse and Other Lines of Credit.
The $366.1 million, or 18.3%, decrease comprised a $514.8 million reduction from the bulk sale of servicing rights associated with $31.9 billion in UPB and $163.0 million from principal amortization and prepayments, partially offset by $252.1 million of capitalized servicing rights from servicing-retained loan sales and $59.5 million increase in fair value. Warehouse and Other Lines of Credit.
Other income includes our pro rata share of the net earnings from joint ventures and fee income from title, escrow, settlement services for mortgage loan transactions performed by LDSS, fair value gains or losses on trading securities, and bank interest income on cash balances.
Other income includes our pro rata share of the net earnings from joint ventures and fee income from title, escrow, and settlement services for mortgage loan transactions performed by LDSS, fair value gains or losses on trading securities, interest income on cash deposits and interest income and fair value gains or losses from loans held for investment. 57 Table of Contents The decrease of $2.6 million, or 3.6%, in other income between periods was attributable to a $5.4 million decrease in income from joint ventures, $3.5 million decrease in trading securities fair value gains, and a decrease in bank interest income of $2.4 million, partially offset by $5.5 million in income related to loans held for investment and a $3.2 million increase in title and escrow fees.
Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (Dollars in thousands) (Unaudited): Year Ended December 31, 2023 2022 2021 Net loss attributable to loanDepot, Inc. $ (110,142) $ (273,020) $ 113,524 Net loss from the pro forma conversion of Class C common shares to Class A common shares (1) (125,370) (337,365) 509,622 Net loss (235,512) (610,385) 623,146 Adjustments to the benefit (provision) for income taxes (2) 32,872 92,337 (132,502) Tax-effected net loss from the pro forma conversion of Class C common shares to Class A common stock (202,640) (518,048) 490,644 Change in fair value of servicing rights, net of hedging gains and losses (3) 45,692 (39,755) 14,478 Change in fair value - contingent consideration — — (77) Stock-based compensation expense and management fees (4) 21,993 20,583 67,304 IPO expenses — — 6,041 Restructuring charges (5) 11,811 25,126 — Gain on extinguishment of debt (1,690) (10,528) — Loss on disposal of fixed assets 1,430 12,594 — Goodwill impairment — 40,736 — Other impairment 925 17,500 — Tax effect of adjustments (6) (19,964) (5,809) (22,814) Adjusted net loss $ (142,443) $ (457,601) $ 555,576 (1) Reflects net loss to Class A common stock and Class D common stock from the pro forma exchange of Class C common stock.
Reconciliation of Net Loss to Adjusted Net Loss (Dollars in thousands) (Unaudited): Year Ended December 31, 2024 2023 2022 Net loss attributable to loanDepot, Inc. $ (98,331) $ (110,142) $ (273,020) Net loss from the pro forma conversion of Class C common stock to Class A common stock (1) (103,820) (125,370) (337,365) Net loss (202,151) (235,512) (610,385) Adjustments to the benefit for income taxes (2) 26,131 32,872 92,337 Tax-effected net loss from the pro forma conversion of Class C common shares to Class A common stock (176,020) (202,640) (518,048) Valuation changes in servicing rights, net of hedging gains and losses (3) 44,675 33,226 (51,418) Stock-based compensation expense 24,919 21,993 20,583 Restructuring charges (4) 7,199 11,811 25,126 Cybersecurity incident (5) 24,628 — — Loss (gain) on extinguishment of debt 5,680 (1,690) (10,528) Loss on disposal of fixed assets 8 1,430 12,594 Goodwill impairment — — 40,736 Other impairment (6) 511 925 17,500 Tax effect of adjustments (7) (26,423) (16,696) (2,617) Adjusted net loss $ (94,823) $ (151,641) $ (466,072) (1) Reflects net loss to Class A common stock and Class D common stock from the pro forma exchange of Class C common stock.
Our approach still relies on selected online lead aggregators, alongside search engine optimization, pay-per-click advertising, banner advertising, and organic content generation to cultivate organic online leads. Direct Origination Expense.
Our approach relies on selected online lead aggregators, alongside search engine optimization, pay-per-click advertising, banner advertising, and organic content generation to cultivate organic online leads. Marketing and advertising expenses remained relatively unchanged with a $0.2 million or 0.2% decrease which reflects cost savings affecting lead aggregators and a decrease in market refinance volume. Direct Origination Expense.
During the year ended December 31, 2023, our loans remained on warehouse lines for an average of 18 days. Our warehouse facilities are generally short-term borrowings and our securitization facility, with an original three-year term, is scheduled to mature in October 2024.
We do not recognize these transfers as sales for accounting purposes. During the year ended December 31, 2024, our loans remained on warehouse lines for an average of 19 days. Our warehouse facilities are generally short-term borrowings with maturities of one year and our securitization facility has a two year term.
Gain on origination and sale of loans, net was comprised of the following components: Year Ended December 31, Change $ Change % (Dollars in thousands) 2023 2022 Discount from loan sales $ (135,943) $ (933,547) $ 797,604 85.4 % Fair value of servicing rights additions 277,387 647,716 (370,329) (57.2) Fair value gains (losses) on IRLC and LHFS 89,290 (342,141) 431,431 126.1 Fair value (losses) gains from Hedging Instruments (4,149) 1,237,524 (1,241,673) (100.3) Discount points, rebates and lender paid costs 306,115 275,981 30,134 10.9 Provision for loan loss obligation for loans sold (8,179) (136,993) 128,814 94.0 Total gain on origination and sale of loans, net $ 524,521 $ 748,540 $ (224,019) (29.9) Gain on origination and sale of loans, net includes several key components.
Gain on origination and sale of loans, net was comprised of the following components: Year Ended December 31, Change $ Change % (Dollars in thousands) 2024 2023 Premium (discount) from loan sales $ 66,489 $ (135,943) $ 202,432 148.9 % Fair value of servicing rights additions 252,076 277,387 (25,311) (9.1) Fair value (losses) gains on IRLC and LHFS (49,302) 89,290 (138,592) (155.2) Fair value gains (losses) from Hedging Instruments 35,778 (4,149) 39,927 962.3 Discount points, rebates and lender paid costs 330,689 306,115 24,574 8.0 Recovery (provision) for loan loss obligation for loans sold 6,348 (8,179) 14,527 177.6 Total gain on origination and sale of loans, net $ 642,078 $ 524,521 $ 117,557 22.4 Gain on origination and sale of loans, net includes several key components.
Reconciliation of Total Revenue to Adjusted Total Revenue (Dollars in thousands) (Unaudited): Year Ended December 31, 2023 2022 2021 Total net revenue $ 974,022 $ 1,255,796 $ 3,724,704 Change in fair value of servicing rights, net of hedging gains and losses (1) 45,692 (39,755) 14,478 Adjusted total revenue $ 1,019,714 $ 1,216,041 $ 3,739,182 (1) Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.
Reconciliation of Total Revenue to Adjusted Total Revenue (Dollars in thousands) (Unaudited): Year Ended December 31, 2024 2023 2022 Total net revenue $ 1,060,235 $ 974,022 $ 1,255,796 Valuation changes in servicing rights, net of hedging gains and losses (1) 44,675 33,226 (51,418) Adjusted total revenue $ 1,104,910 $ 1,007,248 $ 1,204,378 (1) Represents the change in the fair value of servicing rights due to changes in valuation inputs or assumptions, net of gains or losses from derivatives hedging servicing rights.
As of December 31, 2023, we had $1.9 billion in outstanding borrowings and $1.2 billion in additional availability under our facilities. Warehouse and other lines of credit are further discussed in Note 11- Warehouse and Other Lines of Credit. When we draw on our warehouse and securitization facilities we must pledge eligible loan collateral.
Warehouse and other lines of credit are further discussed in Note 12- Warehouse and Other Lines of Credit of the Notes to Consolidated Financial Statements contained in Item 8. When we draw on our warehouse and securitization facilities we must pledge eligible loan collateral.
Personnel expense includes salaries, commissions, incentive compensation, benefits, and other employee costs. The $454.0 million or 44.2% decrease in personnel expense included volume-related declines in commissions of $188.9 million. The remaining decrease of $265.1 million was attributable to lower salaries & benefits.
Expenses Personnel Expense. Personnel expense includes salaries, commissions, incentive compensation, benefits, and other employee costs. The $27.5 million or 4.8% increase in personnel expense included volume-related increases in commissions of $28.2 million. A decrease of $0.7 million to salaries & benefits primarily related to a decrease in severance expenses offset by an increase in salary expense related to headcount.
The decrease of $217.0 million, or 23.5%, was primarily attributed to a net loss of $235.5 million and the repurchase of treasury shares, at cost of $3.2 million to net settlement and withholding tax on vested RSUs.
Equity . The decrease of $197.9 million, or 28.1%, was primarily attributed to a net loss of $202.2 million, an increase to additional paid in capital of $15.8 million, primarily related to the TRA liability and deferred taxes, and the repurchase of treasury shares at cost of $3.8 million to net settle and withhold tax on vested RSUs.
Origination income includes loan origination fees, processing fees, underwriting fees, and other fees collected from the borrower at the time of funding. Lender credits typically include rebates or concessions to borrowers for certain loan origination costs. The $64.5 million, or 49.7%, decrease in origination income was the result of lower loan origination volume. Servicing Fee Income .
Lender credits typically include rebates or concessions to borrowers for certain loan origination costs. The $17.1 million, or 26.2%, increase in origination income was primarily the result of an increase in loan origination volume as well as an increase in HELOC fees associated with the growth in HELOC volume. Servicing Fee Income .
Loans held for sale, at fair value, primarily consist of fixed and variable rate, 15- to 30-year term first-lien loans secured by residential property. The decrease of $240.5 million, or 10.1%, reflects $23.1 billion in loan sales, partly offset by $22.7 billion in loan originations, and a $64.9 million increase in fair value. Servicing Rights, at Fair Value.
The $470.9 million or 22.1% increase reflects $24.1 billion in loan originations and $666.3 million in repurchases, partially offset by $23.9 billion in loan sales, $218.7 million in principal payments and a $122.5 million transfer of loans to loan held for investment. Loans Held for Investment, at Fair Value.
Year Ended December 31, Change $ Change % (Dollars in thousands) 2023 2022 REVENUES: Net interest income $ 3,118 $ 49,307 $ (46,189) (93.7) % Gain on origination and sale of loans, net 524,521 748,540 (224,019) (29.9) Origination income, net 65,209 129,736 (64,527) (49.7) Servicing fee income 492,811 449,150 43,661 9.7 Change in fair value of servicing rights, net (184,417) (194,357) 9,940 5.1 Other income 72,780 73,420 (640) (0.9) Total net revenues 974,022 1,255,796 (281,774) (22.4) EXPENSES: Personnel expense 573,010 1,027,008 (453,998) (44.2) Marketing and advertising expense 132,880 236,828 (103,948) (43.9) Direct origination expense 67,141 120,854 (53,713) (44.4) General and administrative expense 212,732 265,680 (52,948) (19.9) Occupancy expense 23,516 35,306 (11,790) (33.4) Depreciation and amortization 41,261 42,195 (934) (2.2) Servicing expense 27,687 53,106 (25,419) (47.9) Other interest expense 174,103 124,060 50,043 40.3 Goodwill impairment — 40,736 (40,736) NM Total expenses 1,252,330 1,945,773 (693,443) (35.6) Loss before income taxes (278,308) (689,977) 411,669 59.7 Income tax benefit (42,796) (79,592) 36,796 46.2 Net loss (235,512) (610,385) 374,873 61.4 Net loss attributable to noncontrolling interests (125,370) (337,365) 211,995 62.8 Net loss attributable to loanDepot, Inc. $ (110,142) $ (273,020) $ 162,878 (59.7) Net loss of $235.5 million for 2023 reflects a decrease of $374.9 million compared to net loss of $610.4 million for 2022.
Year Ended December 31, Change $ Change % (Dollars in thousands) 2024 2023 REVENUES: Net interest (expense) income $ (843) $ 3,118 $ (3,961) (127.0) % Gain on origination and sale of loans, net 642,078 524,521 117,557 22.4 Origination income, net 82,290 65,209 17,081 26.2 Servicing fee income 481,699 492,811 (11,112) (2.3) Change in fair value of servicing rights, net (215,138) (184,417) (30,721) (16.7) Other income 70,149 72,780 (2,631) (3.6) Total net revenues 1,060,235 974,022 86,213 8.9 EXPENSES: Personnel expense 600,483 573,010 27,473 4.8 Marketing and advertising expense 132,671 132,880 (209) (0.2) Direct origination expense 84,234 67,141 17,093 25.5 General and administrative expense 204,231 212,732 (8,501) (4.0) Occupancy expense 19,434 23,516 (4,082) (17.4) Depreciation and amortization 36,108 41,261 (5,153) (12.5) Servicing expense 37,373 27,687 9,686 35.0 Other interest expense 188,550 174,103 14,447 8.3 Total expenses 1,303,084 1,252,330 50,754 4.1 Loss before income taxes (242,849) (278,308) 35,459 12.7 Income tax benefit (40,698) (42,796) 2,098 4.9 Net loss (202,151) (235,512) 33,361 14.2 Net loss attributable to noncontrolling interests (103,820) (125,370) 21,550 17.2 Net loss attributable to loanDepot, Inc. $ (98,331) $ (110,142) $ 11,811 10.7 Net loss of $202.2 million for 2024 reflects a decrease of $33.4 million compared to net loss of $235.5 million for 2023.
However, we will continue to review our liquidity needs in light of current and anticipated mortgage market conditions and we have taken various steps to align our cost structure with current and expected mortgage origination volumes. Financial Covenants Our lenders require us to comply with various financial covenants including tangible net worth, liquidity, leverage ratios and profitability.
Financial Covenants Our lenders require us to comply with various financial covenants including tangible net worth, liquidity, leverage ratios and profitability. As of December 31, 2024, we were in full compliance with all financial covenants.
Changes in fair value of our servicing rights are recorded as unrealized gains and losses in changes in fair value of servicing rights, net, in our consolidated statements of operations. During 2022 and 2023, the Federal Reserve implemented a series of rate adjustments, resulting in a cumulative increase of 5.25 percentage points in the Federal Funds rate.
Changes in fair value of our servicing rights are recorded as unrealized gains and losses in changes in fair value of servicing rights, net, in our consolidated statements of operations. Beginning in early 2022, long-term interest rates began a period of sustained increases.
MSR facilities are secured by Ginnie Mae, Fannie Mae, or Freddie Mac MSRs, which amounted to $1.3 billion as of December 31, 2023 and Term Notes are secured by specific participation certificates relating to Ginnie Mae MSRs totaling $617.9 million as of the same date. Securities financing facilities provide financing for the retained interest securities associated with our securitizations.
As of December 31, 2024, our Ginnie Mae MSR facility had an outstanding balance of $193.8 million in variable funding notes and $200.0 million in Term Notes, secured by Ginnie Mae MSRs totaling $625.7 million. Securities financing facilities provide financing for the retained interest securities associated with our securitizations.
Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding (Dollars in thousands except per share) (Unaudited) Year Ended December 31, 2023 2022 2021 Net (loss) income attributable to loanDepot, Inc. $ (110,142) $ (273,020) $ 113,524 Adjusted net (loss) income (142,443) (457,601) 555,576 Share Data: Diluted weighted average shares of Class A and Class D common stock outstanding 174,906,063 156,030,350 129,998,894 Assumed pro forma conversion of Class C shares to Class A common stock 147,789,060 163,541,101 192,465,222 Adjusted diluted weighted average shares outstanding 322,695,123 319,571,451 322,464,116 Reconciliation of Net (Loss) Income to Adjusted (LBITDA) EBITDA (Dollars in thousands) (Unaudited): Year Ended December 31, 2023 2022 2021 Net (loss) income $ (235,512) $ (610,385) $ 623,146 Interest expense — non-funding debt (1) 174,103 124,060 79,564 Income tax (benefit) expense (42,796) (79,592) 43,371 Depreciation and amortization 41,261 42,195 35,541 Change in fair value of servicing rights, net of hedging gains and losses (2) 45,692 (39,755) 14,478 Change in fair value - contingent consideration — — (77) Stock compensation expense and management fees 21,993 20,583 67,304 IPO expenses — — 6,041 Restructuring charges 11,811 25,126 — Loss on disposal of fixed assets 1,430 12,594 — Goodwill impairment — 40,736 — Other impairment 925 17,500 — Adjusted EBITDA (LBITDA) $ 18,907 $ (446,938) $ 869,368 (1) Represents other interest expense, which includes gain on extinguishment of debt and amortization of debt issuance costs, in the Company’s consolidated statement of operations.
Reconciliation of Net Loss to Adjusted EBITDA (LBITDA) (Dollars in thousands) (Unaudited): Year Ended December 31, 2024 2023 2022 Net loss $ (202,151) $ (235,512) $ (610,385) Interest expense — non-funding debt (1) 188,550 174,103 124,060 Income tax benefit (40,698) (42,796) (79,592) Depreciation and amortization 36,108 41,261 42,195 Valuation changes in servicing rights, net of hedging gains and losses (2) 44,675 33,226 (51,418) Stock compensation expense 24,919 21,993 20,583 Restructuring charges (3) 7,199 11,811 25,126 Cybersecurity incident (4) 24,628 — — Loss on disposal of fixed assets 8 1,430 12,594 Goodwill impairment — — 17,500 Other impairment (5) 511 925 40,736 Adjusted EBITDA (LBITDA) $ 83,749 $ 6,441 $ (458,601) (1) Represents other interest expense, which includes gain on extinguishment of debt and amortization of debt issuance costs and debt discount, in the Company’s consolidated statement of operations.
(2) loanDepot, Inc. is subject to federal, state and local income taxes.
(2) loanDepot, Inc. is subject to federal, state and local income taxes. Adjustments to the benefit for income taxes reflect the income tax rates below, and the pro forma assumption that loanDepot, Inc. owns 100% of LD Holdings.
Total revenue decreased $281.8 million from a 52.5% decrease in pull-through weighted lock volume that resulted in a $224.0 million decrease in gain on origination and sale of loans. Income Net Interest Income.
The decrease is primarily attributable to an increase in total net revenues of $86.2 million due to a 42 basis point increase in pull-through weighted gain on sale margin and a 6.4% increase in pull-through weighted lock volume that resulted in a $117.6 million increase in gain on origination and sale of loans.
(4) Management fees were discontinued after 2021. During 2021, Management fees were $0.2 million. (5) Reflects employee severance expense and professional services associated with restructuring efforts subsequent to the announcement of Vision 2025 in July 2022. (6) Amounts represent the income tax effect using the aforementioned effective income tax rates, excluding certain discrete tax items.
Refer to Note 5 - Servicing Rights, at Fair Value. 65 Table of Contents (4) Reflects employee severance expense and professional services associated with restructuring efforts subsequent to the announcement of Vision 2025 in July 2022.
Contractual Obligations and Commitments Our estimated contractual obligations as of December 31, 2023 are as follows: Payments Due by Period (Dollars in thousands) Total Less than 1 Year 1-3 years 3-5 Years More than 5 Years Warehouse lines $ 1,947,057 $ 1,947,057 $ — $ — $ — Debt obligations (1) Secured credit facilities 1,087,418 744,046 343,372 — — Term Notes 200,000 — 200,000 — — Senior Notes 997,125 — 497,750 499,375 — Operating lease obligations (2) 55,113 19,201 24,473 11,323 116 Naming and promotional rights agreements 73,919 21,595 28,324 12,000 12,000 Total contractual obligations $ 4,360,632 $ 2,731,899 $ 1,093,919 $ 522,698 $ 12,116 (1) Amounts exclude deferred financing costs.
Future agreements may also limit our ability to pay dividends. 62 Table of Contents Contractual Obligations and Commitments Our estimated contractual obligations as of December 31, 2024 are as follows: Payments Due by Period (Dollars in thousands) Total Less than 1 Year 1-3 years 3-5 Years More than 5 Years Warehouse lines $ 2,377,127 $ 2,077,127 $ 300,000 $ — $ — Debt obligations (1) Secured credit facilities 917,495 423,687 493,808 — — Term Notes 200,000 200,000 — — — Senior Notes 859,816 19,795 301,916 538,105 — Other secured financings (2) 106,733 — — — 106,733 Operating lease obligations (3) 40,808 14,891 22,914 3,003 — Naming and promotional rights agreements 52,324 22,324 12,000 12,000 6,000 Total contractual obligations $ 4,554,303 $ 2,757,824 $ 1,130,638 $ 553,108 $ 112,733 (1) Amounts exclude deferred financing costs.
The increase of $43.7 million, or 9.7%, in servicing income between periods was the result of higher ancillary income due to an increase in interest income earned on custodial funds as a result of higher short-term interest rates, partially offset by a decrease in servicing fees resulting from a decrease of $6.1 billion in the average UPB of our servicing portfolio and a decline in servicing fee income related to excess servicing sales during 2023.
The decrease of $11.1 million, or 2.3%, in servicing income between periods was the result of a decrease in servicing fee collections due to a decrease of $15.8 billion in the average UPB of our servicing portfolio as a result of bulk sales completed during the second quarter of 2024. Change in Fair Value of Servicing Rights, Net .
Total originations were $22.7 billion for the year ended December 31, 2023, compared to $53.8 billion for the year ended December 31, 2022, representing a decrease of $31.1 billion or 57.8%, reflecting decreased demand for mortgage loans due to the elevated rates.
The increase in total net revenues was partially offset by a $50.8 million increase in total expenses, including personnel, direct origination, servicing, and other interest expense. Total originations were $24.5 billion for the year ended December 31, 2024, compared to $22.7 billion for the year ended December 31, 2023, representing an increase of $1.8 billion or 8.0%.
The increase of $9.9 million reflects an $81.2 million decrease in prepayments due to the higher rate environment and a $14.1 million increase in gain on sales of servicing rights, partially offset by an $85.4 million decrease in fair value gains, net of hedging losses. Other Income.
The decrease of $30.7 million reflects an increased loss of $11.4 million in fair value, net of hedge, an increase in the provision for losses of $6.1 million due to the two bulk sales completed during the second quarter of 2024, and a $13.8 million increase in fallout and decay. Other Income.
The $52.9 million or 19.9% decrease in general and administrative expense included a $28.2 million decrease in real estate exit costs, an $8.9 million decrease in office and equipment expenses, a $5.9 million decrease in communications expense, a $5.3 million decrease in professional and consulting services, and a $1.3 million decrease in data processing expense. Servicing Expense.
The $8.5 million or 4.0% decrease in general and administrative expense included a $19.6 million reduction in loss contingency expense, a $4.9 million decrease in office and equipment expenses related to software subscriptions, a $1.8 million decrease in lease impairment and loss on disposal and a $1.2 million decrease in repairs and maintenance related to the consolidation and reduction of office leases and associated expenses, offset by Cybersecurity related costs of $18.8 million.
Removed
The associated increase in mortgage interest rates has impacted mortgage loan origination volumes, impacting affordability and qualification for homebuyers. Total loan originations for 2023 were $22.7 billion, a decrease of $31.1 billion, or 58% compared to $53.8 billion for 2022. The primary driver of this decrease was refinance volume, which decreased by $18.2 billion, or 75%.
Added
Although the Federal Reserve lowered interest rates by 100 basis points in late 2024, long-term interest rates, which fixed rate mortgages are linked with, have not materially lowered.
Removed
The mortgage industry continues to face decreased volumes due to elevated mortgage rates and low inventory of existing homes for sale, driven in part by a large number of existing homeowners benefiting from low-interest rates from previous purchases or refinance. In response to the challenges posed by these market dynamics, we introduced our Vision 2025 Plan in July 2022.
Added
The sustained increase in mortgage interest rates adversely impacted mortgage loan origination volumes, reducing demand for refinance mortgages and impacting affordability and qualification for homebuyers as well as due to a large number of existing homeowners benefiting from low-interest rates, adversely impacting purchase transaction supply .
Removed
Since the initial announcement of Vision 2025, we have consolidated our retail and corporate locations, exited our wholesale business, and expanded offerings on the HELOC platform. We established a joint venture with National HomeCorp, dedicated to extending credit to underserved communities and partnered with Habitat for Humanity to enhance housing conditions.
Added
Vision 2025, launched in July of 2022, was a critical factor in our successful navigation of unprecedented and challenging market condition s over the past three years. During the third quarter of 2024, we achieved profitability and successfully completed our Vision 2025 strategic plan.
Removed
We transitioned our servicing portfolio to an in-house platform; streamlined our leadership structures; and realigned other aspects of our cost structure, resulting in a 35.6% reduction in total expenses of which 30.6% was attributable to non-volume related expenses, compared to a 22.4% decrease in revenue in 2023.
Added
The subsequent launch of Project North Star builds on the strategic pillars of Vision 2025 by focusing on our goal of becoming the lifetime lending partner of choice for homeowners, growing our mortgage reach and capabilities, growing our servicing portfolio over the long-term, and investing in low touch, data-driven mortgage processing workflow to drive operating leverage As we look toward 2025, we anticipate continued market challenges, but we believe that the implementation of Project North Star will allow us to capture the benefit of higher market volumes while we continue to capitalize on our ongoing investments in operational efficiency to achieve sustainable profitability in a wide variety of operating environments.
Removed
These non-volume related reductions were achieved through measures such as headcount reduction, business process optimization, and the consolidation of real estate assets.
Added
The decrease in net interest income was predominately driven by higher cost of funds on warehouse lines as interest rates on debt were higher 56 Table of Contents during the year ended December 31, 2024 and an increase of $215.8 million in the average balance of warehouse lines, partially offset by a higher yield on LHFS and $137.6 million increase in the average balance of LHFS.
Removed
In November 2023, we announced an additional $120 million annualized cost reduction target, including $100 million in non-volume related expenses such as vendor contract termination and renegotiation, optimized marketing spending, and corporate real estate cost reductions, that we expect will benefit our 2024 results.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWhile our contracts vary, we provide representations and warranties to purchasers and insurers of the mortgage loans sold that typically are in place for the life of the loan.
Biggest changeCredit risk is influenced by general economic factors including interest rates, housing prices, and unemployment rates which could impact the borrowers’ ability to make payments on their loans, While our contracts vary, we provide representations and warranties to purchasers and insurers of the mortgage loans sold that typically are in place for the life of the loan.
In general, we manage such risk 67 by selecting only counterparties that we believe to be financially strong, dispersing the risk among multiple counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty and entering into netting agreements with the counterparties, as appropriate.
In general, we manage such risk by selecting only counterparties that we believe to be financially strong, dispersing the risk among multiple counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty and entering into netting agreements with the counterparties, as appropriate.
We used December 31, 2023 market rates on our instruments to perform the sensitivity analysis on our financial assets and liabilities measured at fair value. The interest rate sensitivity analysis assumes instantaneous, parallel shifts in interest rate yield curves. These sensitivities are hypothetical and presented for illustrative purposes only.
We used December 31, 2024 market rates on our instruments to perform the sensitivity analysis on our financial assets and liabilities measured at fair value. The interest rate sensitivity analysis assumes instantaneous, parallel shifts in interest rate yield curves. These sensitivities are hypothetical and presented for illustrative purposes only.
During the year ended December 31, 2023 and 2022, we incurred no losses due to nonperformance by any of our counterparties. Prepayment Risk Prepayment risk is affected by interest rates (and their inherent risk) and borrowers’ actions relative to their underlying loans.
During the year ended December 31, 2024 and 2023, we incurred no losses due to nonperformance by any of our counterparties. Prepayment Risk Prepayment risk is affected by interest rates (and their inherent risk) and borrowers’ actions relative to their underlying loans.
The average term for outstanding interest rate lock commitments at December 31, 2023 was 43 days; and our average holding period of the loan from funding to sale was 32 days for the year ended December 31, 2023. We manage the interest rate risk associated with our outstanding IRLCs, LHFS, and servicing rights by entering into Hedging Instruments.
The average term for outstanding interest rate lock commitments at December 31, 2024 was 41 days; and our average holding period of the loan from funding to sale was 33 days for the year ended December 31, 2024. We manage the interest rate risk associated with our outstanding IRLCs, LHFS, and servicing rights by entering into Hedging Instruments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, we are exposed to various risks which can affect our business, results and operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, we are exposed to various risks which can affect our business, results and operations. The primary market risks to which we are exposed include interest rate risk, credit risk, prepayment risk and inflation risk.
The primary market risks to which we are exposed include interest rate risk, credit risk, prepayment risk and inflation risk. 66 We manage our interest rate risk and the price risk associated with changes in interest rates pursuant to the terms of an Interest Rate Risk Management Policy which (i) quantifies our interest rate risk exposure, (ii) lists the derivatives eligible for use as Hedging Instruments and (iii) establishes risk and liquidity tolerances.
We manage our interest rate risk and the price risk associated with changes in interest rates pursuant to the terms of an Interest Rate Risk Management Policy which (i) quantifies our interest rate risk exposure, (ii) lists the derivatives eligible for use as Hedging Instruments and (iii) establishes risk and liquidity tolerances.
Our expectation of how many of our IRLCs will ultimately close is a key factor in determining the notional amount of Hedging Instruments used in hedging the position. Credit Risk We are subject to credit risk in connection with our loan sale transactions.
Our expectation of how many of our IRLCs will ultimately close is a key factor in determining the notional amount of Hedging Instruments used in hedging the position. Credit Risk We are subject to credit risk in connection with our originating, financing, selling, and servicing residential mortgage loans.
The representations and warranties require adherence to applicable origination and underwriting guidelines (including those of Fannie Mae, Freddie Mac, and Ginnie Mae), including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.
The representations and warranties require adherence to applicable origination and underwriting guidelines (including those of Fannie Mae, Freddie Mac, and Ginnie Mae), including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. 67 Table of Contents We record a provision for losses relating to such representations and warranties as part of our loan sale transactions.
The following tables summarize the estimated change in fair value of our financial assets and liabilities measured at fair value as of December 31, 2023, given hypothetical parallel shifts in interest rates: December 31, 2023 Down 25 bps Up 25 bps Change in fair value (%): LHFS 0.5 % (0.6) % Servicing rights, net (1.3) 1.1 IRLCs, net 18.0 (21.1) Net derivative (liabilities) assets, excluding IRLCs 19.8 (107.9) Total change in fair value — (1.0) 68
The following tables summarize the estimated change in fair value of our financial assets and liabilities measured at fair value as of December 31, 2024, given hypothetical parallel shifts in interest rates: 68 Table of Contents December 31, 2024 Down 25 bps Up 25 bps Change in fair value (%): LHFS 0.6 % (0.6) % LHFI 1.4 (1.4) Servicing rights, net (1.2) 1.2 IRLCs, net 35.0 (40.5) Net derivative (liabilities) assets, excluding IRLCs (27.0) 84.6 Total change in fair value 0.1 % (0.1) % 69 Table of Contents
The level of loan repurchase losses is dependent on economic factors, trends in property values, investor repurchase demand strategies, and other external conditions that may change over the lives of the underlying loans.
The level of the liability for losses from representations and warranties is difficult to estimate and requires considerable management judgment. The level of loan repurchase losses is dependent on economic factors, trends in property values, investor repurchase demand strategies, and other external conditions, including interest rates, that may change over the lives of the underlying loans.
Removed
We record a provision for losses relating to such representations and warranties as part of our loan sale transactions. The level of the liability for losses from representations and warranties is difficult to estimate and requires considerable management judgment.
Added
Credit risk refers to the ability of each individual borrower underlying our loans, mortgage servicing rights, and trading securities, to make required interest and principal payments on the scheduled due dates.
Added
If delinquencies increase, the value of our loans,mortgage servicing rights, and trading securities may decrease and the amount of servicer advances we are required to make related to our mortgage servicing rights will increase.
Added
We believe credit risk is mitigated through stringent underwriting guidelines in our loan origination process and is primarily determined by the borrowers’ credit profiles and loan characteristics.

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