LoanDepot has cut its funding capacity by $1 billion

Mortgage giant loanDepot trimmed its funding capacity for originations by $1 billion in two separate actions in the past two months, according to financial disclosures.

The lender and servicer, in a Securities and Exchange Commission filing last week, cited current and projected mortgage loan originations as reason for a $500 million reduction. It announced a similar move to reduce funding by $500 million in August. 

To make the cuts, the Foothill Ranch, California-based firm said it would prepay securitization facilities and terminate other agreements. LoanDepot didn't have any outstanding borrowings under the facility and did not have to pay termination fees, according to the disclosure. 

The company had no comment beyond its SEC filings, a spokesperson said Tuesday afternoon.

LoanDepot is making significant budget cuts in an effort to achieve profitability by the end of the year, including laying off thousands of employees and cutting its wholesale channel by October, executives said in August during a second quarter earnings conference call. The firm reported a net loss of $223.8 million in the second quarter over a year, more than doubling its losses in the first quarter. 

The securitization identified for prepayment in the September 29 filing is the Mello Warehouse Securitization Trust 2021-1. It issued $500 million of notes backed by a warehouse line of credit secured by newly originated fixed rate or adjustable rate mortgages in accordance with the government-sponsored entities or Ginnie Mae, according to the disclosure.

The company is also terminating its Master Repurchase Agreement associated with that securitization and an indenture between the securitization, loanDepot as a servicer and U.S. Bank as indenture trustee, standby servicer and initial securities intermediary. 

In August, the lender undertook near-identical actions to reduce its funding by $500 million through similar means in August with another securitization and more arrangements also with U.S. Bank. 

LoanDepot last week also said it extended the maturity date of a Bank of America financing facility to Sept. 25, 2023, and didn't alter the funding capacity with that arrangement. The funding amount wasn't disclosed, and the firm said it would expand on the actions in its next earnings report at a date yet to be announced.

Mortgage volumes have declined in six of the past seven weeks, according to the Mortgage Bankers Association, and mortgage rates are approaching 7% after climbing 41 basis points last week to 6.7%, according to Freddie Mac. The turbulent market has forced companies to lay off thousands of employees, exit wholesale lending channels or shut down entirely.