CEDAR
CREEK,
Texas
—


loanDepot
is
“fully
committed”
to
return
to
profitability
and
“aggressively
manage
the
cost
structure”
while
investing
in
“automation
and
process
improvement,”
CEO

Frank
Martell
said
in
an
exclusive
sit-down
interview
during

HousingWire
Annual
earlier
this
month. 

“We
want
to
be
in
a
leadership
position
coming
out
of
this
cycle,
which
I
don’t
measure
simply
in
terms
of
volume
and
size,”
Martell
said.
“We’re
still
going
to
be
the
same
company
in
terms
of
structure.
But
we’re
going
to
be
more
automated
and
purpose-driven.”

loanDepot
hired
Martell
in

April
2022,
three
months
after
he
retired
from


CoreLogic,
to
help
the
company
“deal
with
the
down
cycle,”
he
said.
He
was
not
hired
to
restructure
loanDepot
and
sell
it,
even
though
“every
public
company
is
for
sale,”
in
his
general
opinion. 

In
fact,
loanDepot
recently
showed
the
market
that
it’s
considering
acquisitions
by
appointing
industry
veteran

Dan
Hanson
as
executive
director
of
enterprise
partnerships
and
acquisitions.
The
company
is
looking
for
businesses
that
add
value
to
its
operations,
as
Martell
is
not
“a
big
believer
in
buying
a
bunch
of
LOs
walking
across
the
street.”

Martell’s
first
big
move
as
CEO
was
to
announce
the

Vision
2025
plan
in
July
2022,
which
included
simplifying
the
organizational
structure,
focusing
on
client
service,
quality,
automation
and
operating
leverage. 

Another
restructuring
was
announced
this
year:
consolidating
LDI
Digital,
including
mellohome,
into
existing
production
channels
under
Jeff
Walsh’s
leadership.
Amid
a
shrinking
market,
Vision
2025
was
extended
into
2026
and
beyond,
Martell
said.

In
the
Q&A
below,
Martell
shared
more
details
about
loanDepot’s
strategy
and
focus
in
the
months
and
years
ahead.

This
interview
has
been
condensed
and
edited
for
clarity.

Flávia
Nunes:

As
loanDepot
narrows
its
financial
losses,
what
does
the
company’s
path
to
profitability
look
like?

Frank
Martell:
We
are
fully
committed
[to
reaching
profitability].
From
the
implementation
of
Vision
2025,
we
have
significant
cost
reductions.
And
the
losses
have
come
down
to
just
roughly
$50
million
a
quarter.
By
the
way,
some
of
that
is
book
[losses].
Our
cash
flow
is
actually
better,
still
negative,
but
better
than
the
book
losses.
That
trajectory
should
continue,
obviously,
subject
to
the
market.

We
solved
for
breakeven
about
five
times
in
the
last
18
months
because
the
market
has
just
come
down.
But
we
have
a
lot
of
cash,
over
$700
million.
I
would
expect
the
most
likely
period
[for
a
trajectory
to
profitability]
is
the
spring
selling
season,
as
we
get
into
next
year
and
the
market
provides
some
lift.
Right
now,
it’s
ultra-low.
But
the
fact
that
we
are
reducing
losses
as
the
market
continues
to
deteriorate
is
a
good
thing.
I’d
expect
the
trend
to
continue.

Nunes:
Margins
at
loanDepot
also
rose
in
Q2
2023.
How
sustainable
are
these
higher
margins?

Martell:
Time
will
tell.
But
our
margin
is
driven
by
mix
and
also
a
more
productive
cost
structure.
Those
factors
shouldn’t
change.
There
are
a
lot
of
players
out
there
that
are
fighting
for
their
lives,
but
we’re
pretty
disciplined.
I
don’t
expect
a
major
shift.
There
could
be
some
ups
and
downs.
The
margins
are
supported
by
the
mix
of
the
business
presently
and,
also,
our
cost,
which
is
very
much
something
we’re
focused
on,
even
beyond
the
market.

We
have
to
be
efficient.
Despite
the
fact
that
the
market
is
so
bad,
we’re
investing
quite
a
bit
of
money
in
re-platforming
and
in
some
of
the
key
point-of-sale
systems.
We’re
doing
that
to
make
sure
that
when
the
market
turns,
we
can
participate
and
drive
margin
and
productivity.
And
not
just
adding
tons
of
people
—
that
is
the
traditional
model
in
mortgages.

Nunes:

loanDepot
fell
from
the
8th
largest
U.S.
lender
in
2022
to
13th
in
the
first
half
of
2023,
per


Inside
Mortgage
Finance

estimates.
How
will
loanDepot
recover
this
market
share?  

Martell:
Obviously,
we
exited
the
wholesale
channel
last
year.
That
is
a
big
chunk
of
what
they’re
looking
at.
We
were
one
of
the
first
to
exit
it,
and
it
was
the
right
decision.
And
then
also
a
little
bit
of
a
mix
of
the
volumes,
because
we
did
have
such
a
large
percentage
of
revenue
in
refi.

The
company
was
about
70%
[refis]
and
30%
[purchases].
Now,
we
have
three-quarters
of
purchase
loans.
We’re
holding
our
own
from
a
market
share
point
of
view.
But
we’re
also
being
disciplined.
We’re
not
chasing
business
that
doesn’t
make
sense.
We’re
trying
to
make
sure
our
focus
is
on
the
strategic
growth
areas
that
we
think
will
contribute
to
the
first-time
homebuyer,
diverse
lending
and
affordable
[lending]. 

Nunes:

As
loanDepot
returns
to
profitability,
what
market
share
can
we
expect
in
the
coming
quarters?

Martell:
We
want
our
fair
share.
But
we
want
to
do
it
in
the
context
of
Vision
2025.
We’ve
extended
that
to
2026
or
so.
We’ll
rename
it
something.
The
company
is
purposeful.
We
are
a
very
large
lender
already
in
diverse
communities
—
Hispanic,
Black
and
Asian.
We
are
proud
of
that.
As
we
go
forward,
first-time
homebuyers
are
going
to
be
more
diverse.
We
can’t
do
what
we
did
with
the
baby
boomers
era.
It’s
got
to
be
something
in
a
different
engagement
model. 

From
a
share
perspective,
we
don’t
want
to
lose
share.
But
we’re
not
looking
to
take
share
for
share’s
sake.
Whether
we’re
[No.]
7,
8,
10
or
5,
we’re
a
major
player.
We
want
to
be
in
a
leadership
position
coming
out
of
this
cycle,
which
I
don’t
measure
simply
in
terms
of
volume
and
size.
We
have
four
channels
[joint
ventures,
retail,
consumer
direct
and
servicing].
We’re
still
going
to
be
the
same
company
in
terms
of
structure.
But
we’re
going
to
be
more
automated
and
purpose-driven.

Nunes:

What
is
the
strategy
to
get
more
purchase
loans
in
this
market
after

exiting
the
wholesale
channel?
In
general,
what
is
the
product
strategy
at
loanDepot? 

Martell:
Most
of
our
purchase
transactions
are
coming
through
the
JV
[joint
ventures]
channel
and
our
in-market
retail
network.
I
don’t
see
that
changing.
The
direct-to-consumer
channel
is
more
home
equity
and
refi-driven;
they
do
some
purchases,
but
it’s
primarily
that.
Our
in-market
retail
channel,
I
think
we
have
a
great
team
there.
We
have
plenty
of
products
and
solutions
for
the
market.

Our
percentage
of
government
conforming
has
increased,
which
is
good.
We’re
stable.
We
have
a
very
large
contingent
of
loan
officers
and
branch
networks.
Looking
at
the
market
shifting
towards
interest-only
variables
and
the
jumbos,
we
don’t
compete
in
those
areas.
We
don’t
hold
loans
on
our
balance
sheet.
A
lot
of
jumbos
are
being
originated
from
the
bank’s
balance
sheet.

Nunes:

How
relevant
are
joint
ventures
for
loanDepot?
How
do
the
financials
work
in
these
partnerships? 

Martell:
We
have
a
number
of
joint
ventures.
The
ones
we’re
talking
about
now
are
more
our
ventures
with
builders.
We
have
several
very
large
builders.
That’s
new
construction.
It’s
being
sold
in
the
market,
and
supply
is
tight.
This
has
been
an
area
that’s
been
very
productive
for
the
company
and,
frankly,
for
housing
to
[produce]
more
supply.
We
help
these
lenders
run
the
mortgage
operation
and
provide
support
for
their
home
sales.
Usually,
the
name
would
be
in
the
name
of
the
builder,
but
it’s
run
by
loanDepot. 

It
[the
financials]
is
pretty
similar
to
a
normal
underwriting
transaction;
it’s
very
similar
economics-wise.
There
are
some
nuances
because
of
the
building
process
and
how
long
a
rate
lock
would
be
in
effect.
It’s
just
a
strong
market
now
and
for
the
foreseeable
future.
That
channel
is
growing,
and
we’re
benefiting
from
that.
We
don’t
disclose
that
publicly
[how
much
JVs
represent
from
the
business],
but
it’s
meaningful. 

Nunes:

loanDepot
has
reduced
its
headcount
to
4,683
employees
as
of
June
30,
2023,
compared
to
8,540
a
year
ago.
What
can
we
expect
moving
forward? 

Martell:
I
said
on
the
last
couple
of
earnings
calls
that
we’re
going
to
continue
to
aggressively
manage
the
cost
structure.
A
lot
of
what
we’ve
been
cutting,
generally,
the
full
benefit
lags
a
bit.
Part
of
our
reduction
in
losses
is
the
flow
through
the
benefit
of
actions
taken
in
the
past.
But,
realistically
speaking,
we’re
still
going
to
be
driving
cost
productivity.

In
my
experience,
this
is
a
time
when
the
company
will
get
better
because
the
market
requires
it.
If
you’re
going
to
win
the
market,
we
have
to
do
better.
The
multichannel
is
unique.
The
team’s
capabilities
are
unique;
our
quality
is
quite
good.
And
people
don’t
fully
realize
it.
I
get
many
letters
from
customers
thanking
us
(maybe
complaints
here
and
there).
But
our
quality
is
really
good.
Things
like
repurchases
have
come
down
quite
a
bit,
and
so
that
will
continue. 

Cost-cutting
for
addressing
the
market
drop
is
one
thing.
Reducing
through
automation
and
fundamental
process
improvement
is
something
that
we
want.
Something
I’ve
believed
all
my
career
is
that
you
can
always
do
something
better.
That’s
how

Rocket
started.

Quicken
Loans
was
focused
on
‘Engineered
to
Amaze.’
I
remember
that,
and
that’s
right.
So
we’re
doing
the
same
thing
—
optimizing
and
automating.
You’ll
see
continued
cost
reduction;
whether
it’s
necessarily
headcount-focused
is
the
question.

Nunes:

How
is
loanDepot
retaining
and
attracting
loan
officers?

Martell:
Our
attrition
rates
have
fallen.
There’s
a
lot
of
loyalty
to
the
company.
Do
people
get
offers?
That’s
all
slowed
to
a
trickle.
The
market
participants,
the
people
that
were
doing
that,
I
don’t
think
they
can
afford
it.
We’ve
seen
that
slowdown.
Our
voluntary
turnover
has
been
manageable
and
static
for
some
time.
We’ll
see
if
that
continues.

Everybody’s
challenged
in
this
market.
There’s
nobody
winning.
Some
folks
have
tried
buying
market
share,
but
it
doesn’t
work
well
—
I
think
most
times
—
because
market
volumes
are
not
there.
We’ve
been
successful
in
attracting
talent
without
resorting
to
big
sign-on
bonuses.
I
think
LOs
fly
to
quality
and,
as
some
of
our
competitors
struggle
more
and
more,
having
the
scale
and
the
reputation,
we
are
seeing
an
inflow
versus
the
challenges
when,
in
the
middle
of
last
year,
the
market
was
falling,
and
we
announced
Vision
2025.
We
tried
to
be
very
transparent,
and
you
tend
to
typically
get
outflows.
But
that’s
now
a
thing
of
the
past.

Nunes:

In
Q2,
loanDepot
had
a

leadership
shake-up,
with
chief
financial
officer


Patrick
Flanagan,
chief
accounting
officer
Nicole
Carrillo
and
chief
human
resources
officer
Kevin
Tackaberry,
among
others,
departing
the
company.
What
happened? 

Martell:
One
thing
we
discussed
about
Vision
2025
was
organization
optimization
and
review.
When
I
arrived,
a
lot
of
the
executive
team
was
scattered
all
over
the
place.
It
was
a
function
of
COVID-19.
Patrick
Flanagan
is
a
very
fine
CFO,
but
he
was
remote.
When
we
explained
that
we
wanted
to
bring
not
every
single
person
but
the
critical
executive
team
back
into
Irvine,
that
was
why
you
see
most
of
the
people
[parting
ways].
And
then,
obviously,
we
wanted
to
reduce
redundancy
and
layers.
That
was
really
what
those
folks
were.

Nunes:

What
was
the
rationale
behind
consolidating
LDI
Digital,
including
mellohome,
into
existing
production
channels
under
Jeff
Walsh?

Martell:
When
we
created
Vision
2025,
Jeff
Walsh
took
all
the
channels.
So,
all
of
our
revenue
generation
was
under
Jeff
Walsh.
Jeff
had
primarily
run
wholesale.
We
had
LDI
Digital,
which
included
mellohome,
with
a
component
of
Realtor
[aspects]
and
also
the
component
technology.
So
there’s
mello
technology.
But
the
more
we
looked
at
that
structure,
I
wanted
to
integrate
it
more.
And,
when
you
have
two
divisions,
there’s
always
similar
costs.
We
just
put
those
two
together.
Now,
to
be
honest,
LDI
Digital
wasn’t
that
large.
We
incubated
our
HELOC
product,
LDI
Digital.
That
had
gotten
to
maturity.
This
made
sense.
As
it
got
bigger
in
revenue,
it
was
taken
over
by
Jeff
Walsh.

Nunes:

Where’s
the
company
when
you
see
its
technology
journey
regarding
leadership
and
platforms? 

Martell:
I’ve
been
around
a
long
time,
and
I’ve
had
a
lot
of
CIOs.
George
Brady
is
our
CIO;
he’s
just
phenomenal.
He’s
been
there
the
whole
time
I’ve
been
there
and
helped
architect
the
technology
strategy.
I
don’t
anticipate
changes
there.
IT
is
always
a
tough
area
to
keep
people,
especially
remember
when
COVID
started
and
all
the
technology
people
were
hiring
everybody.
It
was
crazy.
There
was
a
little
fluctuation
there.
That
was
before
my
time
at
loanDepot,
but
I
saw
it
at
CoreLogic.
That’s
all
changed.
We’ve
got
a
pretty
good
team. 

The
mello
technology
is
a
calling
card.
When
I
recruit
people
and
talk
to
people
in
the
industry,
the
perception
of
our
technology
is
that
it’s
top-notch,
which
is
true.
Our
point-of-sale
platform,
our
underwriting
decisioning
.
.
.
it’s
really
good.
We
have
a
new
generation
coming
out
before
the
end
of
this
year.
I
feel
good
about
technology.
loanDepot
traditionally
has
been
more
of
an
in-house
player
from
a
technology
point
of
view.
There
was
a
lot
of
investment
during
the
boom
in
2020
and
2021.
We’ve
harvested
the
benefits
of
that.   

Nunes:

What
makes
mello
technology
competitive? 

Martell:
It’s
the
usability,
the
speed
and
the
types
of
data
that’s
provided.
Most
technology
tends
to
be
overly
complicated.
It’s
much
more
relatable
to
the
consumer
and
to
the
loan
originator.
A
lot
of
our
users
are
internal.
I
spend
a
lot
of
time
on
the
floor
with
our
loan
officers
and
watch
them
use
the
different
technology
platforms
we
have.
It
makes
a
big
difference
that
they’re
able
to
make
decisions,
underwriting
decisions;
there’s
lots
of
complexity
in
terms
of
compliance
costs
related
to
different
types
of
loans.
You
need
to
have
that
[mello
technology]
to
make
those
decisions
and
talk
to
borrowers. 

Nunes:

HousingWire
reported
on
the
battle
between
loanDepot’s
founder

Anthony
Hsieh
and
the
board
to
nominate
a
new
member.
What
happened?
What
is
Hsieh’s
role
at
the
company?

Martell:
Anthony
is
our
founder
chairman.
He’s
prominent
in
the
strategy.
We
just
had
a
strategic
planning
review.
He’s
a
great
student
of
the
industry.
He’s
engaged.
He
and
I
work
well
together.
We’re
complementary
in
terms
of
approach.
I’ve
had
a
great
relationship
with
Anthony. 

The
board
issue
.
.
.
the
correct
thing
is
Anthony
had
somebody
that
he
wanted
to
put
forward
as
a
board
director.
And
he
did
that;
the
board
was
considering
his
proposed
candidate,
and
he
felt
he
wanted
to
make
a
public
statement.
There
was
not
a
proxy
fight.
The
bottom
line
is
we
brought
on
Steve
[Ozonian];
he’s
been
a
good
contributing
board
member.
There
wasn’t
any
strife
or
any
issue,
per
se.
It
was
more
of
a
tempest
in
a
teacup.
The
board
is
very
collegial.
We
don’t
have
fights
on
the
board.
Everybody
is
singularly
focused
on
coming
to
this
cycle
stronger.

Nunes:

When
you
joined
loanDepot,
industry
experts
said
that
it
could
be
a
step
to
put
the
company
up
for
sale.
Is
that
on
the
horizon? 

Martell:
The
proper
answer
is
we
are
a
public
company.
Every
public
company
is
for
sale
every
day.
All
these
rumors
and
speculations
.
.
.
we’re
a
large
company,
and
we’ll
do
whatever
is
proper
for
the
shareholders.
Anthony
and
Parthenon
[Capital],
for
a
matter
of
public
record,
are
the
controlling
shareholders.
Whatever
would
be
done
would
be
with
their
review
and
approval.
But
I
was
not
brought
in
to
sell
a
company.
I
was
brought
in
to
help
deal
with
the
down
cycle.
And
I
have
a
track
record
of
doing
that
successfully.

Nunes:

With
the
appointment
of
Dan
Hanson
as
executive
director
of
enterprise
partnerships
and
acquisitions,
what
acquisitions
is
the
company
currently
pursuing?

Martell:
There
is
a
lot
of
challenge
in
the
market.
A
lot
of
companies
have
either
gone
out
of
business
or
dwindled.
The
longer
this
goes,
the
worse
it’s
going
to
get.
I’ve
done
over
100
acquisitions
in
my
career.
But
you
need
to
find
a
value
accretive
to
the
company’s
operations.
I’m
not
a
big
believer
in
buying
a
bunch
of
LOs
walking
across
the
street.
We
want
technology.
We
want
value
added.
We
signaled
publicly
that
Dan
Hanson
is
going
to
run
in
that
area.
We
did
that
on
purpose
because
we
want
people
to
know
that
we’ll
look
at
stuff
—
whether
we
do
anything
or
not
is
another
matter.