LoanDepot Inc - Ordinary Shares - Class A Stock

Good afternoon and welcome to loanDepot's Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. [Operator Instructions] I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining our second quarter 2026 earnings call. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued earlier today, which is available on our website at investors.loandepot.com.

Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons. For more details on these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP measures, please refer to today's earnings release. A webcast and a transcript of this call will be posted on our website after the conclusion of this call. On today's call, we have loanDepot's Founder and Chief Executive Officer, Anthony Hsieh; and Chief Financial Officer, David Hayes.

They will provide an overview of our quarter, a review of our operating results, and our outlook. We are also joined by Chief Investment Officer, Jeff DerGurahian; and Chief Digital Officer, Dominick Marchetti, to help answer your questions after our prepared remarks. With that, I'll turn things over to Anthony to get us started. Anthony?

Thank you, Gerhard. I appreciate everyone joining us on the call today. When I returned as full-time CEO 1 year ago, I set a clear transformation agenda to position loanDepot for profitable market share growth in any macro environment. We have moved decisively to reshape the business and are starting to see signs of our progress. We are making more loans faster and at a lower cost. In the second quarter, revenue increased, operating leverage improved, and our net loss narrowed substantially, even as interest rates rose meaningfully beginning in March. While we are in the early innings of our transformation, the pace of improvement accelerated as the quarter progressed, with June demonstrating the strongest results so far this year.

A central driver of this momentum is the progress we made during the second quarter in executing our strategic expansion into home equity lending.

This represents a significant expansion opportunity within a market supported by approximately $35 trillion of U.S. homeowner equity. It represents a potential market size more than double total mortgage debt outstanding. Importantly, these are the same homeowners we have long served through traditional refinance products. In a higher rate environment, however, home equity products can allow qualified borrowers to access liquidity while preserving an attractive first mortgage rate and may offer a more compelling value proposition than higher cost alternatives such as unsecured personal loans, credit cards, and certain small business financing products.

Home equity lending is more stable, less rate sensitive, and less seasonal than refinance and purchase mortgage lending. It is also stickier in that it meets an ongoing customer need. Loan balances are smaller, but gain on sale and revenue are both typically higher, and our cost to produce is significantly lower.

We are now seeing the result of this pivot. During the quarter, we increased unit volume by 25% from the first quarter, reflecting the success of our launch into this product segment. We believe that when rates fall and traditional refinance activity returns, home equity will remain an attractive product for a large segment of the market, particularly those customers with ultra-low pandemic-era interest rates that are unlikely to be in the money for traditional refinance.

Home equity lending broadens our addressable market and complements our traditional purchase and refinance business. It addresses our customers' liquidity needs and benefits from attractive unit economics. The second quarter results demonstrate that this strategic shift is beginning to translate into measurable growth, stronger margins, and improved operating leverage. During the year, we continued to expand our core mortgage franchise by adding builder partners in our joint venture channel, and branch locations in our retail channel.

That growth drove a 33% increase in purchase market share in the second quarter and reinforces the durability of our diversified origination platform. It's important to understand that we believe that we are the #1 independent mortgage company financing new home construction for builders. This is a critical competitive advantage. Our ability to pivot towards home equity and continue to grow purchase market share reflects the agility of our team and the adaptability of loanDepot's origination model.

Few originators have the multi-channel distribution, customer relationship, or operating expertise to make that transition at scale. We believe we are uniquely positioned with our nationally recognized brand, valuable servicing portfolio, diversified channels, including our growing wholesale channel, proven ability to develop loan officers organically, industry-leading recapture capabilities, and technology-enabled customer acquisition platform, allowing us to redirect capacity towards a product that offers the greatest customer and shareholder value at a given rate environment. Together, these assets help generate customer leads at the top of the funnel and support a broad distribution network that includes retail and partner channels, as well as what we believe to be 1 of only 2 scaled direct lending platforms.

Our ability to efficiently convert marketing investments at the top of the funnel into customer leads and new customer acquisition is an important market differentiator. The market is extremely fragmented, giving us a huge opportunity to apply our differentiated assets to profitably grow market share. Producing, managing, and directing leads to our loan officers has been a core competency since founding the company. With new technology powering lead conversion, we expect to create more customers while also driving down marketing costs.

Powering our growth is our ability to organically develop loan officers. Over the past year, we increased our net loan officer count by 18%. This growth is broad-based and consists of newly trained loan officers graduating from our proprietary ACES program in our direct channel, and experienced loan officers with established relationships in our retail channel. This quarter's results are evidence of the progress we have made over the past year.

As we strengthened our platform, rebuilt our management team with leaders that have deep expertise across mortgage, technology, and marketing, expanded our loan officer base, improved marketing performance, and invested in technology and AI-enabled capabilities designed to enhance productivity and the customer experience. To punctuate this progress over the past year, we have increased return on marketing by 70%. We increased marketing lead to funded loan conversion by 50%. We reduced marketing cost per funding by 34%, reduced total cost per funded loan by 12%, and increased funded loan units per loan officer by 18%.

As we continue to scale the platform, we believe there are opportunities to realize additional operating leverage across our business in a range of market environments. Our technology-enabled multi-channel platform creates a unique opportunity to partner with additional financial service providers that can benefit from our scale, distribution, and sales culture. Few originators have the resources or expertise to make this transition at scale.

When refinance and purchase opportunities return, we will be ready to move just as quickly to capture them. This is what it means to be built to compete across market cycles. While important work remains, we believe we have the discipline and focus to increase operating leverage and cost containment necessary to continue progressing towards sustainable profitability over time. With that, I will now turn the call over to Dave, who will take us through our financial results in more detail. David?

Thanks, Anthony, and good afternoon, everyone. The second quarter marked another meaningful step forward in our financial performance, demonstrating that we can grow volume while maintaining a focus on efficiency and profitability. We reported an adjusted net loss of $29 million in the second quarter compared to an adjusted net loss of $34 million in the first quarter, due primarily to higher adjusted revenue while limiting expense growth to primarily volume-related costs. During the second quarter, our loan origination volume was $8.0 billion for the quarter, an increase of 4% from the prior quarter's volume of $7.7 billion.

This was within the guidance we issued last quarter of between $7.25 billion and $9.25 billion. The increase in closed loan volume was more notable, given the mix shift towards smaller, 5x5 home loan products, which carry a smaller loan balance compared to traditional firsts.

On a unit basis, we increased volume 25% during the quarter, reflecting the success of the product and the investment in our loan officers. As Anthony stated, we increased both loan officers and their productivity since last year. Pull-through weighted rate lock volume was $6.6 billion, which represented a 20% decrease from the prior quarter's volume of $8.3 billion. As a reminder, pull-through weighted rate lock volume is down primarily due to the product mix shift to HELOC, which does not record a lock. Pull-through weighted rate lock volume also came in within the guidance we issued last quarter of $5.75 billion to $7.75 billion and contributed to adjusted total revenue of $308 million, which compared favorably to $299 million in the first quarter.

Our pull-through weighted gain on sale margin for the second quarter came in at 345 basis points, within our guidance range of 330 to 360 basis points and up compared to 271 basis points in the prior quarter.

Our higher gain on sale margin primarily reflected product mix shift. The higher rate environment suppressed demand for first trust deed loans, but demand for higher margin 5x5 home loan HELOC products increased. Their contribution can be seen in the 60% increase in origination income from the prior quarter. Servicing fee income increased from $109 million in the first quarter to $112 million in the second quarter, primarily due to a larger portfolio size and higher interest credit on our escrow balances. We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value in results of our operations.

We believe this strategy helps protect against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to changing industry environments. Maintaining a strong liquidity position remains a top priority for us, and as such, we took advantage of strong market conditions to monetize approximately $10 billion of our servicing rights post-quarter end.

We expect this trade to settle later in the year and will be reflected in the coming quarters. Our total expenses for the second quarter increased by $2 million, or less than 1% from the prior quarter. The primary drivers of this increase were higher commissions and direct origination expenses, reflecting the increase in origination volume. This was partially offset by the progress on operating leverage metrics that Anthony mentioned.

Looking ahead to the third quarter, we expect pull-through weighted lock volume of between $5.25 billion and $7.25 billion, and origination volume of between $6.25 billion and $8.25 billion. These ranges reflect an ongoing mix shift as our 5x5 home loan product continues to be a popular product in the current rate environment. HELOC volume is not reflected in the lock volume, but it is reflected in the closed loan volume. It is also worth noting that the shift to HELOC production resulted in higher unit volume and contribution margins, albeit at smaller average loan sizes.

We expect our third quarter pull-through weighted gain on sale margin to be between 360 and 390 basis points. Our total expenses are expected to decrease somewhat in the third quarter, primarily due to the benefit of repurchasing our corporate debt at a discount, partially offset by higher volume-related costs, as we continue to drive growth in our HELOC product. As part of our ongoing cost management strategy, the company has begun actioning approximately $12 million of annualized productivity initiatives progressing through the remainder of the year.

We ended the quarter with $229 million in cash, decreasing by $48 million from the first quarter. However, the previously mentioned MSR sale and other financing strategies in-flight should mitigate this decrease going forward. Additionally, we repurchased $16 million of senior notes at an average purchase price of 90% of par during the quarter and repurchased an additional $27 million of notes at an average purchase price of 86% of par post-quarter end through July 30, 2026.

Finally, we continue to evaluate opportunities to optimize our capital structure. Addressing the company's bond maturities remains a high priority for the management team, and we're evaluating a range of options with the help of our retained advisers. Anthony stated this earlier, but it bears repeating. Our goals are to continue investing and driving top line and market share growth, reducing our costs and increasing operating leverage, and applying automation and technology across the origination and servicing businesses to achieve consistent profitability in any environment. With that, we're ready to turn it back over to the operator for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Douglas Harter with BTIG.

On your guidance and as you think about the third quarter, how should we think about the mix between HELOC and first mortgage, and how that influences kind of the gain on sale range that you gave and volume range? And I guess included in that, how do you think about, on a like-for-like basis, the products, how the gain on sale margin is trending in the third quarter versus the second?

Anthony Hsieh here. So, I'm going to answer the question assuming rates are going to stay relatively in the same zip code. And of course, as rates change, you're going to see a return in first mortgages more pronounced on the refinance side than on the resale or purchase side. But certainly, all that is directed by what happens to interest rates. The home equity market, Doug, has been a strategy since my return. It has taken some time to retool marketing, retool technology, and to retool our point of sale system as well as retraining of our sales staff. So over the course of the last 6 months, this is starting to prove some traction. And the momentum is finally here.

We're feeling pretty good about it. The market is a new entrant for us. So we do expect the momentum to continue. We are starting to be very opportunistic by adding loan officers on the direct lending side. I think you might have seen we just announced a new opening of our Miami center, which will give greater coverage to the East Coast and that particular time zone. So understanding the competition in the home equity market is uniquely different, Doug, than refinance as well as purchase market. A traditional mortgage player, it is much more difficult for a traditional mortgage company to attack the home equity market because you're relying on your loan officers to generate the production for you, where in this case, the company generates the leads at the top of the funnel, utilizing our capacity and our ability to develop loan officers organically to fulfill the customer's demand.

So over Q3, we expect home equity to continue. But your question of what is the ratio there, it really depends on the interest rate sort of movement. Because as rates do fall, you're going to see the return of first mortgages. But if it stays static, I think you can safely assume that we will continue to penetrate and grow our HELOC volume, which ultimately will slant the margins upward.

I appreciate that, Anthony. And then just a clarification on the MSR sale. I guess what is the size? The presentation says $12 billion. I think you mentioned $10 billion. And is there any way you can frame kind of the total dollars that you expect to receive from that sale?

So the sale was $10 billion. I'll double check what your reference was on the $12 billion. We did do a $12 million cost savings program, which was announced. But the overall sale of the portfolio was $10 billion.

So yes, slide 6 of your presentation has $12 billion.

We'll fix that.

Great. And any sense of the size, the amount of cash that you expect to receive from that?

It's Jeff DerGurahian. We'll just say that the trade executed well through our marks and we continue to evaluate opportunities in the market, as we stated before on other calls, and we decided to execute here because it made sense given all the factors considered.

Your next question comes from the line of Mihir Bhatia with Bank of America.

Hi, this is [ Caroline Lada ] on for Mihir. So looks like recapture declined sequentially about 5 points. Was that driven primarily by customer behavior, competitive intensity, or mix shift towards the home equity products, and what recapture level should we think about going forward?

You know, there's really no particular cause, [ Caroline ]. I would guess that it's due to the fact that interest rates went up Q2 over Q1. So anytime rates go up, you'll have less attractiveness for consumers. I do expect that amount of recapture will increase as we continue to develop our home equity offering. So I don't expect that to materially change over Q3.

Okay, cool. And then maybe just on wholesale, since it was reintroduced earlier this year, is there any quantitative metrics you can give us about where wholesale stands today and whether that channel is tracking ahead of or behind where you contemplated when you reentered the market?

Yes, great question. Wholesale business is a complement for us, [ Caroline ]. It is never likely to be a major contributor of ours. So far, I think it's been 5 or 6 months since we introduced it. We are tracking ahead of schedule. And so far the business is doing quite well. We've had positive responses from the broker community.

Your next question comes from the line of Mikhail Goberman with Citizens JMP.

Just wanted to get your general thoughts on the competitive landscape out there. We've seen some of the big banks report some pretty good numbers for origination sequentially. Just wondering if they're taking share at the margin. And just your general thoughts on the competitive landscape from a kind of big picture point of view.

So, we haven't seen an increase in competitive pressure. Within the last 24 hours, we've had some news in the marketplace where a couple of competitors have exited the mortgage market or changed their strategy towards more of a B2B structure rather than consumer direct. What we've seen over the last quarter is our ability to hold on to margins in both purchases and refinances. And our purchase share as an example, from Q1 to Q2, our purchase share went up 33% while our volume increased 44% on purchase business.

At the same time, as we enter the home equity market, from April to June as an example, we have reduced our loss tremendously. In April, discounting fair value, we entered the quarter at a $15 million loss in April. And in June, we reduced that to $2 million.

So we can see clear progress on our market penetration because we're entering a completely new market segment, which is the home equity market.

And just if I can squeeze one more in, your thoughts on technology and AI endeavors within the firm going forward, any plans to sort of ramp things up and how would that lead to further kind of operating leverage possibilities?

Yes, Dom Marchetti is on the line. So Dom, do you want to take that and maybe I can complement your answer?

Yes, I'd love to. Yes, we've been spending huge focus on first, the team that we're able to take full advantage of the team and execute against our strategies. We're leveraging the fact that we already have a proprietary platform and control over our destiny. We have a diversified sales platform. Inside of that, we're very focused first and foremost on revenue-generating top of funnel emphasis with contact, transfer, origination focus tools, and we've seen a huge benefit there. That's enabled obviously 5x5 and our ability to add diversified products on top of that platform.

The second focus has been clearly around operational efficiency measures, and we're already receiving feedback around, you know, very, very highly improved performance from the agencies as it relates to verification processes and some of the underlying tools and capabilities that we've been leaning into. And lastly, just leveraging automation through a combination of tools available in the market and doubling down on our proprietary platform to drive additional opportunities that allow us to scale very, very effectively when interest rates decrease. And like I said, already seeing benefits of that in the notes that Anthony shared.

Yes, I just want to add to what Dom is saying real quickly, and that is, you know, this organization is about deploying modern technology so that it gives us a competitive advantage. AI right now, everyone has a cute acronym or a nickname to their system. I think getting beyond all the cuteness of all the new entrants, I think you need to really understand how to develop this technology and utilize it so that gives you a competitive advantage. We continue to study it, we continue to evaluate it, and we continue to make the investments where it gives us an edge. AI will fundamentally change this industry. And we believe that given our assets and our strategy and uniqueness of touching the customer at the top of the funnel, it's going to benefit us greatly.

There are no further questions at this time. I will now turn the call back to Anthony Hsieh for closing remarks.

Thank you. On behalf of Dave, Jeff, Dom, and the rest of our team, I want to thank you for joining us today. Since my return as CEO, I have been laser-focused on our digital transformation as a key enabler of our return to a market-leading position. We have focused on fully leveraging our unique assets and strategy, including one of the most differentiated customer acquisition or retention business models in the marketplace today.

I'm proud of the work that has been accomplished since my return to a full-time operating role. Ultimately, our goals are to deliver profitable market share growth, improve the customer experience, drive customer retention, and deliver long-term shareholder value. This is our mission and what we are working towards every day. This is how we win. Executing these objectives positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape. So thanks again, everyone, and I appreciate your support. Bye for now.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to loanDepot's First Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to hand the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining our First Quarter 2026 Earnings Call.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued earlier today, which is available on our website at investors.loandepot.com.

Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons. For more details on these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP measures, please refer to today's earnings release.

A webcast and transcript of this call will be posted on our website after the conclusion of this call.

On today's call, we have loanDepot's Founder and Chief Executive Officer, Anthony Hsieh; and Chief Financial Officer, David Hayes. They will provide an overview of our quarter, a review of our operating results and our outlook. We're also joined by Chief Investment Officer, Jeff DerGurahian; and Chief Digital Officer, Dominick Marchetti, to help answer your questions after our prepared remarks.

And with that, I'll turn things over to Anthony to get us started. Anthony?

Thank you, Gerhard. I appreciate everyone joining us on the call today.

We are now 3 quarters into the rebuild of our company. And I believe that all of our hard work will soon be reflected in our financial performance. We spent the most recent quarter focused on a series of long-term growth initiatives that we expect will accelerate our momentum in coming months, including the addition of over 100 new loan officers, the reimagining and relaunch of our wholesale business and the completion of our game-changing partnership agreement with Figure. I'll talk about each of these initiatives in more detail in a moment, but I'm pleased to share they are delivering promising early results.

Since my return as CEO, I have been laser-focused on our digital transformation as a key enabler of our return to a market-leading position. We have focused on fully leveraging our unique assets and strategy, including one of the most differentiated customer acquisition and retention business models in the marketplace today. This included rebuilding our management team with members that have deep mortgage technology and marketing IQ.

With this team now largely in place, we have spent the past several quarters hiring and training more loan officers with the goal of growing market share and positioning ourselves for accelerated growth when demand increases. This growth is broad-based and consists of newly trained loan officers graduating from our proprietary ACES program in our direct channel and experienced loan officers with established businesses in our retail channel. We also recently reopened our wholesale channel as part of our strategy to offer more products to our customers and leverage our existing infrastructure while limiting incremental expenses.

Response from the broker community has been very positive, with many directly reaching out seeking to partner with loanDepot. Despite a volatile market environment, these initiatives helped us increase market share during the quarter, which I consider vital to our goal of achieving consistent profitability in the current market.

Behind the scenes, we remain focused on reducing unit costs through operating leverage and automation. As demonstrated this quarter, we sharpened our marketing strategies to drive more lot volume to the top of the funnel while reducing marketing costs, increasing our return on marketing.

Looking forward, I believe the digital migration of the customer will continue to accelerate, and we plan to be there to meet the customer. Led by our digital team, we are hard at work introducing cutting-edge technology and AI capabilities to our repeatable and scalable functions across each aspect of the origination and servicing life cycle, including lead acquisition and conversion, loan officer and servicing CRM management and underwriting process.

Our recently announced partnership with Figure Technology Solutions is expected to meaningfully accelerate our work and is delivering promising early results. As part of this partnership, we integrated Figure's proprietary credit and loan underwriting engine into our own proprietary mello technology platform. enabling us to seamlessly offer a variety of innovative home loan products to our customers.

Importantly, our partnership also positions us to introduce new and innovative products that expand the way we serve borrowers in the future and capitalize on market improvements. The 5x5 HomeLoan, which delivers approval in as little as 5 minutes and funding in as few as 5 days brings real value to those seeking speed and convenience in their financial transaction. As we integrate this platform across our channels, we expect to lower our cost of production, improve the customer experience, close more loans quickly and advance our long-term objective of profitable market share growth.

We also believe that this product will be a consistent contributor to the earnings power of the company as customers with record levels of home equity and historically low interest rates on their First Trustees should remain a reliable source of demand even as interest rates fall. As we look ahead with expectations of a larger market, our top of the funnel customer acquisition advantage uniquely positions us to outperform our competition in a rapidly evolving and consolidating marketplace.

I'm proud of the work that has been accomplished since my return to a full-time operating role. We plan to continue investing in growing our top of the funnel customer acquisition and origination capabilities, leveraging our brand and marketing muscle, along with introducing contemporary technology, including AI, which should lower our costs and increase our operating efficiency.

Ultimately, our goal are to deliver profitable market share growth, improve the borrower experience, drive customer retention and deliver long-term shareholder value. This is our mission and what we are working towards every day. Regardless of interest rate movements, we are focused on delivering consistent profitability. We believe we are well on our way towards that goal. And as rates fall, that time line will be shortened.

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

Thanks, Anthony, and good afternoon, everyone.

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

During the first quarter, pull-through weighted rate lock volume was $8.3 billion, which represented a 14% increase from the prior quarter volume of $7.3 billion. Pull-through weighted rate lock volume came in within the guidance we issued last quarter of $7.75 billion to $8.75 billion and contributed to adjusted total revenue of $299 million, which compared to $316 million in the fourth quarter of 2025.

As Anthony mentioned, the growth in rate lock volume was achieved while reducing marketing expenses by 12% during the quarter. This positive operating leverage reflected improved strategies for mid-funnel lead conversion and our sharpened marketing strategies. Our pull-through weighted gain on sale margin for the fourth quarter came in at 271 basis points at the low end of our guidance range of 270 basis points to 300 basis points and down compared to 324 basis points to the prior quarter.

Our lower gain on sale margin primarily reflected interest rate volatility and product mix shift. The geopolitical environment created a sharp increase in interest rates during the first quarter, and we originated fewer higher-margin FHA, VA and HELOC loans and originated more conventional loans, both effects compressing our margin. Higher interest rates during the quarter also generated wider negative fair value marks on our mortgage servicing and trading securities, contributing to lower revenue.

Our loan origination volume was $7.7 billion for the quarter, a decrease of 5% from the prior quarter's volume of $8 billion. This was at the high end of our guidance we issued last quarter of between $6.75 billion and $7.75 billion. Closed loan volume also represented a market share increase, demonstrating the success in investing in increasing our loan officers. Servicing fee income decreased from $113 million in the fourth quarter of 2025 to $109 million in the first quarter and primarily due to lower interest earnings from lower custodial balances, along with fewer days in the quarter.

Despite the lower servicing revenue, we're able to increase our market-leading recapture rate to 73% from the prior quarter's 71%. We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value and the results of our operations. We believe this strategy helps protect against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to the changing interest rate environment.

Our total expenses for the first quarter decreased by $565,000 from the prior quarter. We guided to higher expenses during the quarter, but ended up delivering a decrease. The primary drivers of the decrease were lower commissions due to the impact of implementing a more efficient commission strategies and lower marketing expenses, as I previously discussed.

Salary-related expenses increased due to higher headcount as we build capacity and the impact from seasonal employment tax resets. We also experienced higher direct origination expenses as vendors increased the cost of credit reporting services. We believe that process and workflow improvements underway should mitigate some of the increased credit reporting costs going forward.

Looking ahead to the second quarter. We expect pull-through weighted lock volume of between $5.75 billion and $7.75 billion, and origination volume of between $7.25 billion and $9.25 billion. These ranges reflect a shift in mix as our 5x5 HomeLoan product ramps up, which has a very fast funding profile and which volume is not reflected in the lock volume, but is reflected in the closed loan volume.

We expect our second quarter pull-through weighted gain on sale margin to be between 330 basis points and 360 basis points. When evaluating our margin guidance, keep in mind that HELOC products are originated without an interest rate lock. Therefore, our guidance reflects the expected revenue contribution of those products in the numerator, but expected volume is not included in the denominator. They also generally carry a higher gain on sale margin, but lower average loan balances and combined with leveraging the Figure underwriting platform, have a lower cost structure.

Taken together, we believe the partnership will have a positive impact on our bottom line and a meaningful contributor to growth going forward. Our total expenses are expected to increase in the second quarter, primarily driven by higher volume-related costs, reflecting higher expected originations quarter-over-quarter. We ended the quarter with $277 million in cash, decreasing by $60 million from the fourth quarter, reflecting our net loss, the investment in servicing rights and timing differences related to our MSR secured borrowings.

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

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

[Operator Instructions] Your first question comes from the line of Mihir Bhatia with Bank of America.

I wanted to start maybe with just the gain on sale margin guide. You have a reasonable step-up in the guide between -- from the first quarter's 271 bps level. Can you just talk about some of the factors that are driving that?

Yes. Sure. It's David Hayes. It's really reflective of a couple of things. But first and foremost, it's the introduction of our 5x5 loan product, which is a HELOC product. That carries a much stronger gain on sale margin with it. And with the recent partnership with Figure, we've really started to ramp that production. So, we're seeing a higher percentage mix of volume coming from that product, which is averaging up our gain on sale margin. Additionally, on the First Trustee side of the house, we saw a product mix shift that diluted our margin in the first quarter, and we're starting to see that shift back towards FHA, VA and overall higher home equity volumes, which is also contributing to a higher gain on sale margin.

Okay. Got it. And then just on the volume and pull-through dynamics. I think there's weighted locks, I think, in 1Q were $8 billion. You're obviously guiding to some funded originations here in 2Q, but the locks for 1Q is like $5.75 billion to $7.7 billion, like a little bit smaller than first quarter. Are you making changes in your pull-through fallout or assumptions, or something else happening there? Or is this just every year seasonality from 1Q to 2Q?

No. This is kind of a pretty significant shift I commented in the prepared remarks, where with the ramping of this new 5x5 product, it's a HELOC and there's no lock associated with it. So instead, when you look at our lock guidance, that volume is not represented there. It is represented in our funded volume. And so you'll see where our lock volume came down is because all that volume is showing up in funded volume. It's a very quick turn time on that. So the time from app to fund is very quick. But there is no lock associated with it.

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

Correct. We view...

The changes are happening...

To be clear, it's the product mix shift between a higher percentage of -- an expectation of higher percentage of HELOCs versus First Trustees.

Yes. And this is Anthony Hsieh. I just want to chime in and add my two cents to what David described. It's not only a difference in how we measure revenue because the HELOC loan is not locked. However, the bigger difference is that a locked loan, the normal cycle is around 25 days to 33 days until you recognize the funding of that loan. Our 5x5 product is funding in 5 to 7 calendar days. So, it's a very fast process because it utilizes technology to fund loans and process loans. So ultimately, it's going to drive down our cost to produce, but it does change the pull-through as you look at it from the traditional way because we're not publishing the origination on these HELOC 5x5 loans.

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

I didn't understand that question. I'm sorry.

Sorry. I was just wondering if there was any differences? Yes, just intra-quarter dynamics between both recapture rate -- between competitive intensity and recaptures just given the movement in interest rates.

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

Our next question comes from Mikhail Goberman with Citizens JMP.

If I could get some color on how you guys see the mix between origination income and servicing fee income going forward? And also separately, to what extent do you guys think or not that a substantial decline in mortgage interest rates is needed to get a sort of a run rate of earnings that starts to trend in the right direction?

So, I'll take the second question and perhaps, David, you can take the first question, the blend between servicing income and origination income. So it's been a solid 3 quarters since we have redirected and started to rebuild the organization. And of course, if yield was at 4.0% today on the 10-year, the environment here would be substantially different. However, understanding that we're at 4.4% to 4.5%, we are still quite bullish based on all of the hard work that we have done.

We have shown tremendous progress in market share, top line revenue growth and more meaningfully is our efficiency and marketing. As we drive top of the funnel leads, our ability to convert mid-funnel and conversion to originations, that has changed in a meaningful way over the last 3 quarters. So as long as we continue and we have every reason to believe that we will continue to drive that positive momentum, and that really is the roots of this organization.

And that is producing lead flow at the top of the funnel and converting it in a best-in-class within the industry for us to scale and have profitable market share growth. That's exactly what we did from 2010 to 2022. So, we are resuming a playbook that has worked for decades. It just is going to take some time in order for us to build all the mechanics, the tools, the measuring, monitoring as well as personnel management, and we're well on our way in doing that.

Yes. And I'll just add from sort of the mix question around servicing revenue relative to mortgage revenue. I would say, obviously, the servicing revenue will be a function of rates and run-off. But generally speaking, I would expect that to grow quarter-over-quarter by a couple of percentage points. We really think that the opportunity lies on the mortgage revenue side. We're heavily investing in loan officer additions across both the direct and retail side of the house. And by virtue of that, we think that we should be able to grow mortgage revenue quarter-to-quarter from where we sit today, coupled with sort of the seasonality of the business for second and third quarters.

Great. Fantastic color. If I could just squeeze in one more as well. Just curious about the liability side of your balance sheet, your thoughts on addressing upcoming debt maturities.

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

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

Thank you. On behalf of Dave, Jeff, Dom and the rest of our team, I want to thank you for joining us today.

The pieces are in place. We are executing on our strategy to compete at the highest levels by returning to our core strength. Our strategy rests on 4 objectives: one, investing in the business through growth, operational efficiency and infrastructure; two, becoming a best-in-class mortgage banker or in other words, find another loan, close it faster, produce it cheaper and maintain superior loan quality. Three, growing profitable market share by hiring and training sales professionals in each of our channels and by increasing our channel and distribution capabilities. We plan to grow our origination capacity to capture profitable market share growth across refinance, resale and new home loans.

And finally, four, returning to profitability by investing in our origination and new customer acquisition capabilities, growing our servicing portfolio, improving our recapture rates, growing our brand and marketing and increasing our operating leverage. We believe we can return to consistent profitability. This is how we win. Executing these objectives positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape.

So thanks again, everybody, and I appreciate your support. Operator?

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

Good afternoon, everyone, and welcome to loanDepot's Year-end and Fourth Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining our year-end and fourth quarter 2025 earnings call. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued earlier today, which is available on our website at investors.loandepot.com.

Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons. For more details on these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP measures, please refer to today's earnings release. A webcast and a transcript of this call will be posted on our website after the conclusion of this call.

On today's call, we have loanDepot's Founder and Chief Executive Officer, Anthony Hsieh; and Chief Financial Officer, David Hayes They will provide an overview of our quarter as well as our financial and operational results and outlook. We are also joined by Chief Investment Officer, Jeff DerGurahian; and Chief Digital Officer, Dominick Marchetti, to help answer your questions after our prepared remarks.

With that, I'll turn things over to Anthony to get us started. Anthony?

Thank you, Gerhard. Hello, everybody. I appreciate everyone joining us on the call today. I am pleased with the early results of our work to increase our scale and market penetration. While the fourth quarter is typically a seasonally slow quarter, we originated the most volume since 2022, gained share in an expanding market and achieved a 71% recapture rate from our in-house servicing platform. These results reflect progress in our return to the core competencies that enable the scaling to become the second largest retailer lender nationally during our first decade. Not only did we fund the largest volume of loan originations since 2022, but we also increased our market share. We expect to continue this trend as the market consolidates and large-scale diversified customer-facing originators like loanDepot benefit.

While the third-party origination and MSR markets have consolidated around scale and operating efficiency, the consumer-facing marketplace remains highly fragmented and inefficient. Post financial crisis and Dodd-Frank, no retail lender currently controls more than 5% market share, which presents a significant opportunity for a customer-facing scaled originator. Furthermore, I believe the digital migration of the customer will continue to accelerate, particularly the purchase customer as more digital advancements make the entire home buying process more automated.

We believe our assets and strategy provide us with unique competitive advantages to meet the customer as they migrate to a more digital experience as well as consolidating the market fragmentation, leveraging the most differentiated customer acquisition and retention business model in today's marketplace. First, our distribution model consisting of digitally enabled direct-to-consumer nationwide end-market retail and partnership with homebuilders bring new customers into our ecosystem across a diversity of transactions and geographies. Combining these best-in-class origination capabilities, we provide our customers access to purchase, refinance and home equity lending opportunities across market cycles.

Second, vertical integration means we control the consumer experience from end to end, turning the flywheel from application to closing to servicing and back again through our industry-leading recapture capabilities, which are enhanced by our technology assets, relentless pursuit of customer service and our nationally recognized brand. Said simply, our primary strategy focuses on being one of the only scaled originators primarily creating and servicing our own customers as opposed to acquiring customers from third parties.

As we look ahead with expectation of a larger refinance market, our top-of-the-funnel customer acquisition advantage uniquely positions us to outperform our competition in a rapidly evolving and consolidating marketplace. Behind the scenes, we remain focused on reducing unit costs through operating leverage and automation while investing in our marketing engine to drive more opportunities to the top of the funnel.

In terms of innovation, our digital team led by Dom and Sean have made positive impacts by introducing AI capabilities to some of our most repeatable and scalable functions that improve the performance of lead acquisition and conversion, loan officer, CRA management and new underwriting processes. Each of these initiatives are having positive impact on the business with wide user acceptance, including by our customers and should drive positive operating efficiencies as volume increase.

I am proud of the work that has been accomplished since my return to a full-time operating role. We are just scratching the surface of what this team can do. As digital migration continues to gain momentum, the company is capable of deploying AI applications directly to consumers will define the productivity and efficiency standards for our industry. We plan to continue investing and growing our top of the funnel customer acquisition and origination capabilities, leveraging our brand and marketing muscle, along with introducing contemporary technologies, including AI, which should lower our costs and increase our operating efficiency. Ultimately, our goals are to deliver profitable market share growth, improve the customer experience, drive customer retention and deliver long-term shareholder value. This is our opportunity and what we are working towards every day.

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

Thanks, Anthony, and good afternoon, everyone. For the sake of time, I'll limit my commentary primarily to our fourth quarter results. The fourth quarter reflected the emerging benefits of our investment in technology and operating efficiency during a period of higher volumes. We reported an adjusted net loss of $21 million in the fourth quarter compared to an adjusted net loss of $3 million in the third quarter of 2025 due primarily to lower pull-through weighted gain on sale margin, higher amortization on our MSR portfolio and higher expenses, offset somewhat by higher pull-through weighted lock volume.

During the fourth quarter, pull-through weighted lock volume was $7.3 billion, which represented a 4% increase from the prior quarter's volume of $7 billion. Pull-through weighted rate lock volume came in within the guidance we issued last quarter of $6 billion to $8 billion and contributed to adjusted total revenue of $316 million, which compared to $325 million in the third quarter of 2025.

Our pull-through weighted gain on sale margin for the fourth quarter came in at 324 basis points at the high end of our guidance range of 300 to 325 basis points, but down compared to 339 basis points in the prior quarter. Our lower gain on sale margin primarily reflected product and loan purpose mix shift.

During the fourth quarter, we originated relatively fewer higher-margin second trust deeds and FHA VA loans compared to the third quarter as part of our strategy to capture increased share of refinance volume. This resulted in larger average loan balances, resulting in decreasing our margin percentage. Our loan origination volume was $8.0 billion for the quarter, the highest level of origination since 2022, an increase of 23% from the prior quarter's volume of $6.5 billion. This was also within the guidance we issued last quarter of between $6.5 billion and $8.5 billion.

Servicing fee income increased from $112 million in the third quarter of 2025 to $113 million in the fourth quarter of 2025 and primarily reflects an increase in collections due to the growth of the unpaid principal balance of our servicing portfolio. We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value in the results of our operations. We believe this strategy helps protect against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reflection to the changing interest rate environment.

Our total expenses for the fourth quarter of 2025 increased by $8 million or 3% from the prior quarter. The primary driver of this increase was due to higher personnel costs. Commissions increased as a result of the higher funded volume and salaries increased primarily due to loan officer hiring and the related operations staff. However, the remaining volume-related marketing and direct origination expenses were lower quarter-over-quarter despite higher volume, reflecting some of the benefits of our investments in process improvements and technology initiatives, including some of the early benefits from the initiatives that Anthony mentioned earlier.

Looking ahead to the first quarter, we expect pull-through weighted lock volume of between $7.75 billion and $8.75 billion and origination volume of between $6.75 billion and $7.75 billion. We expect our first quarter pull-through weighted gain on sale margin to be between 270 and 300 basis points. Our guidance reflects market volatility, seasonality in the purchase volume, the affordability and availability of new and resale homes and the level of mortgage interest rates and our strategy of targeting larger average refinance loan balances.

Our total expenses are expected to increase in the first quarter, primarily driven by personnel and G&A expenses, somewhat offset by lower volume-related expenses. The increase in personnel and G&A expenses are primarily associated with our investments in growth and the automation and innovation initiatives that Anthony mentioned. We remain focused on our commitment to profitability and continue to work with a discipline to grow revenue and manage costs while maintaining ample cash and a strong balance sheet.

We ended the quarter with $337 million in cash, decreasing by $122 million from the third quarter, reflecting the investment in our loan inventory and the full repayment of our outstanding 2025 unsecured notes. During the full year 2025, we made significant year-over-year progress in investing in operating efficiencies that translated to positive financial results for the year. We were able to increase our adjusted revenue by 10% year-over-year while limiting expense growth by less than 1%, which has resulted in shrinking our adjusted net loss by 31%.

Thanks to our progress, we are entering 2026 fundamentally a stronger company versus 2025. With that, we're ready to turn it back over to the operator for Q&A.

[Operator Instructions] Your first question is from Madison Suhr with Raymond James.

This is Taylor on for Madison. Maybe just to start on your comments around profitable share gains. It was good to see the uptick in market share this quarter. Could you maybe expand on this and share where you're seeing success, whether that's in certain regions or retail direct versus partner channel? And then on the flip side, where you're hoping to see improvement in 2026?

I didn't get the last statement there, Taylor, if you can repeat that.

Yes. Just to -- sorry, I don't know if my audio may be bad here, but just to expand on your profitable share gain comments and where you're seeing success, if there's any difference in certain regions or your different channels and then on the flip side, where you're hoping to see improvement in 2026?

Yes, I'll try to tackle that, Taylor. You faded again towards the end there. loanDepot has a diversified retail customer touch model. So just to remind everyone, we have our digital-first direct lending business. We have our in-market retail business, and we have our builder business. So the builder business is predictable and stable, and we are experiencing steady growth. The retail business, in-market business is when we grow by hiring in-market loan officers in each of the local markets that we serve. That business is primarily resale and purchase business. Our direct lending business is where lots of opportunities are available today. We did retrace in the last few years in our market share on the direct lending side.

And there are tremendous opportunities for us to rebuild our marketing funnel, our lead management systems, our CRM, our leads scoring system and all of the functionalities that make direct lending functional. Dom and Sean, as they started over the last 6 months or so, have been asked to completely rebuild our lead funnel engine utilizing AI. So there's lots of opportunities for us to continue to push down marketing cost, which is cost per customer acquisition. And we're seeing early wins as our volume and market share on our direct lending channel is starting to improve. There's still lots of work to do, but we're very, very bullish about our ability to penetrate additional market share through our direct lending channel.

Got it. All that color is very helpful. And then if I could just squeeze in one more here just on your -- just to get a sense of your 2026 non-volume-related OpEx and profitability expectations. I know you haven't guided for the year, but can you just give us a sense on how you're thinking about the non-volume expense growth in 2026 and how we should think about operating leverage for the business in the next year?

Yes. Sure, Taylor, it's David. Yes, I think, generally speaking, as volume grows, you will see the scalable nature of our business given we do have a fixed cost that we get to amortize that incremental revenue over. I think from a year-over-year basis on sort of that non-volume-related growth, you'll see some modest investment into some technology initiatives and innovation initiatives that will help drive the growth for the overall profile of the company. So that's predominantly where you'll see that in. The rest of the expense growth will be volume related in the context of loan officer additions and related operations staff to support that volume.

And I just want to add, Taylor, by saying that as we scale and penetrate profitable market share, which is something that is not foreign to this organization since our inception in 2010, I want to remind everyone that we did grow 38% year-over-year for the first 11 years through profitable market share gains. As we scale up, most of the cost, there will be variable cost as we add on additional personnel for funding of loans at the same time as we achieve AI efficiencies. But most of the fixed cost is pretty much already baked into the year.

Your next question is from Eric Hagen with BTIG.

Some housekeeping here. The pickup in amortization expense to $52 million in the quarter, is that a good run rate to reflect the expense going forward? Or could we actually see it maybe come back down because rates have moved back the other way even just this quarter?

I would say, Eric, there was a pickup in the quarter related to the higher refinance volumes that came in. That was obviously offset by our kind of best-in-class leading recapture rate, but I think they could moderate a little bit into the first quarter, but it really depends on rates on a go-forward basis and where that will go.

Okay. All right. That's helpful. We're actually pretty intrigued by the level of cash-out refis in the period. Is there some overlap in the borrowers that you originated there where you also own the first lien in your MSR portfolio? And is that just the pickup in cash out refi volume in the period, would you say that's a function of your lead generation or something else? And how does the margin for cash out refis compared to the other products you guys are originating?

Eric, it's Anthony. So we see customers shift over to cash out refinances rather than taking out a HELOC or a closed-end second anytime the 10-year yield or mortgage rates drop. So the good news there is we have the optionality to offer to that customer. And the volume on both sides are actually fairly similar because the CES margin has higher basis points, but lower loan amount. So we are seeing both products shift as mortgage rates do drop or climb back up.

Your next question is from Mikhail Goberman with Citizens JMP.

Just curious if you could maybe delve into a little bit of the thought process of the announcement the other day of getting back into the wholesale lending channel and what kind of volumes if you're targeting in that space over what kind of time frame? And what kind of margins do you expect to see in that space?

So I can talk about the strategies there. So getting back into wholesale, which is a business that we were in previously, is going to allow us to achieve greater scale. It's a third-party origination, as you know. So we do not control the customer experience, but we are and we will be able to utilize the volume to help us create additional operating efficiency. And as we anticipate a volume growth and most likely a refinance volume return, we expect margins to expand, which will make wholesale model much, much more attractive. So we think this is the ideal timing for us to get back into the wholesale model.

All right. Great. And if I could just squeeze in one more. Is there a level of recapture that you guys are targeting? I appreciate the 71% figure for this last quarter. Is there a level you guys targeting going forward?

I think we're always going to be around that level. I think with technology changing and with AI being a better predictor of any customer that potentially could be in the market for an additional refinance, I think that number could go up. But I believe that we are pretty much at the top of the house as far as our recapture percentages.

[Operator Instructions] There are no further questions at this time. I will now turn the call back to Anthony Hsieh for closing remarks. Please go ahead.

Well, thank you, everybody. On behalf of Dave, Jeff, Dom and the rest of our team, I want to thank you for joining us today. The pieces are in place. We are executing a bold strategy to compete at the highest levels by returning to our core strength.

Our strategy rests on 4 objectives: one, investing in the business through growth, operational efficiency and infrastructure; two, becoming a best-in-class mortgage banker or in other words, find another loan, close it faster, produce it cheaper and maintain superior loan quality.

Three, growing profitable market share by hiring and training sales professionals in each of our channels, we plan to grow our origination capacity to capture profitable market share growth across refinance, resale and new home loans. And finally, four, returning to profitability by investing in our origination and new customer acquisition capabilities, growing our servicing portfolio, improving our recapture rates, growing our brand and marketing and increasing our operating leverage. We believe we can return to consistent profitability.

This is how we will win. Executing these objectives positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape. So thanks again, everyone, and I appreciate your support. Bye for now.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to loanDepot's Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Gerhard Erdelji, Senior Vice President, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining our third quarter 2025 earnings call. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements regarding the company's operating and financial performance in future periods. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, guidance to our pull-through weighted rate lock volume, origination volume, pull-through weighted gain on sale margin, strategies, capabilities and financial performance. These statements are based on the company's current expectations and available information. Actual results for future periods may differ materially from these forward-looking statements due to risks or other factors that are described in the Risk Factors section of our filings with the SEC.

Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into analyzing and benchmarking the performance and value of our business and facilitating company-to-company operating performance comparisons. For more details on these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP measures, please refer to today's earnings release, which is available on our website at investors.loandepot.com. A webcast and a transcript of this call will be posted on our website after the conclusion of this call. On today's call, we have loanDepot's Founder and Chief Executive Officer, Anthony Hsieh; and Chief Financial Officer, David Hayes. They will provide an overview of our quarter as well as our financial and operational results and outlook. We are also joined by Chief Investment Officer, Jeff DerGurahian; and Dominick Marchetti, Chief Digital Officer, to help answer your questions after our prepared remarks.

And with that, I'll turn things over to Anthony to get us started. Anthony?

Thank you, Gerhard. I appreciate everyone joining us on the call today. During the 5 months since I returned to loanDepot as CEO, we made significant changes to our business that align with our objective of growing our market share profitably. Before I speak to these achievements, let me first talk about our strategy and positioning in the marketplace today. We continue to believe strongly in our diversified business model with best-in-class origination capabilities across multiple channels that provide access to purchase, refinance and home equity lending opportunities across market cycles. These origination capabilities are complemented by our in-house servicing platform and recapture capabilities, all of which are enhanced by our technology assets and our nationally recognized brand. This diversified strategy enables loanDepot to grow from a de novo start-up in 2010 to at one point become the second largest retail lender in the country.

We are confident this strategy will win in today's highly fragmented market and are committed to profitably regaining share. The key is execution, and our team is laser-focused on our plan. Our actions in the third quarter reflect this focus. In the third quarter, we initiated a business transformation that included naming new leadership across all of our origination channels, consumer direct, retail and partnership lending as well as our in-house servicing platform. We also transformed our technology and innovation functions under new leadership. In our consumer direct channel, we realigned our sales leadership team to catalyze new sales strategies under our next-generation lending initiatives. We also announced the formation of a revenue operations and strategy function to be led by our returning Chief Strategy Officer, Rick Calle.

On the marketing side, in October, our brand lit up on the national stage during the MLB post season, which through the League Championship Series enjoyed the highest viewership since 2017, including the ALCS and NLCS post-season viewership averaged 4.5 million views per game. Looking beyond the baseball season, loanDepot Park will soon host some of the biggest events in professional sports, including the NHL Winter Classic and the World Baseball Classic, providing our brand with continued strong national exposure. In our retail and partnership channels, we announced new channel presidents, Tom Fiddler and Dan Peña, respectively. Tom is reigniting the energy of our retail channel, emphasizing profitable organic growth and helping ensure our loan officers have access to the best-in-class products, tools and operations in the industry. Dan is doubling down on our commitment to providing value to our homebuilder partners, most recently leading a new relationship with Betenbough Homes. In September, we announced the addition of Adam Saab to lead our servicing business.

Our servicing capabilities and portfolio of customers are key parts of our strategy, particularly the flywheel effect of recapturing our existing customers for refinancing or purchase at no additional acquisition cost. In terms of innovation, our Chief Digital Officer, Dom Marchetti, and Chief Innovation Officer, Sean DeJulia, who rejoined the company in August, have already made an impact by introducing AL capabilities to some of our most repeatable and scalable call center functions, both improving performance and driving down cost. Right now, we are pivoting the use of new and emerging technologies across sales, operations and software engineering with an expectation that these innovations will improve the customer experience while driving improved productivity and lower our cost of production. We are just scratching the surface of what this team can do.

And last, but certainly not least, in terms of leadership talent, just yesterday, we announced Nikul Patel as our Chief Growth Officer. He will be responsible for growth opportunities, acquisition activities and customer engagement, helping the company capitalize on AL disruption and accelerate our momentum. Nikul is a significant hire that brings a proven track record of success, deep fintech expertise and a strategic mindset, completing the company's leadership transformation. To recap, the third quarter was a period of significant change for our organization, focused on establishing the leadership team that will execute our plan for profitable market share growth. We believe in our strategy and the positioning of our assets in this highly fragmented market. Our focus is on execution, which we look forward to sharing our progress along the way. With that, I will now turn the call over to Dave, who will take us through our financial results in more detail. David?

Thanks, Anthony, and good afternoon, everyone. The third quarter reflected the benefits of higher revenue and contained expense growth from positive operating leverage. We reported an adjusted net loss of $3 million in the third quarter compared to an adjusted net loss of $16 million in the second quarter of 2025 due primarily to higher lock volume, higher pull-through weighted gain on sale margin, higher servicing revenue, offset somewhat by higher expenses. During the third quarter, pull-through weighted rate lock volume was $7 billion, which represented a 10% increase from the prior quarter volume of $6.3 billion. Pull-through weighted rate lock volume came in within the guidance we issued last quarter of $5.25 billion to $7.25 billion and contributed to adjusted total revenue of $325 million, which compared to $292 million in the second quarter of 2025.

Our pull-through weighted gain on sale margin for the third quarter came in at 339 basis points, within our guidance range of 325 to 350 basis points and compared to 330 basis points in the prior quarter. Our higher gain on sale margin primarily reflected a channel mix shift with a higher contribution from our direct channel and a lower contribution from our joint venture channel compared to the prior quarter. Our loan origination volume was $6.5 billion for the quarter, a decrease of 3% from the prior quarter's volume of $6.7 billion. This was also within the guidance we issued last quarter of between $5 billion and $7 billion. Servicing fee income increased from $108 million in the second quarter of 2025 to $112 million in the third quarter of 2025, and primarily reflects the increase in our unpaid principal balance of our servicing portfolio and interest earned on the seasonal increase in custodial balances.

We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value and the results of our operations. We believe this strategy helps protect against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to the changing interest rate environment. Our total expenses for the third quarter of 2025 increased by $19 million or 6% from the prior quarter. The primary drivers of the increase were due to onetime benefits in salary and general and administrative expenses recognized in the prior quarter. Recall that during the second quarter, salaries benefited from approximately $8 million in lower stock-based compensation from equity surrenders and G&A benefited from $5 million insurance recovery of legal fees related to the successful outcome of litigation. Excluding these nonrecurring items, our total expenses would have increased by approximately 2%, demonstrating the positive operating leverage we are striving for as volumes and revenues increase.

Looking ahead to the fourth quarter, we expect pull-through weighted lock volume of between $6 billion and $8 billion and origination volume of between $6.5 billion and $8.5 billion. We expect our third quarter pull-through weighted gain on sale margin to be between 300 and 325 basis points. Our guidance reflects market volatility, seasonality in purchase volume, affordability and availability of new and resale homes and the level of mortgage interest rates. Our total expenses are expected to increase in the fourth quarter, primarily driven by higher volume-related expenses from the increase in funded volume as we close the pipeline that started growing through the third quarter. We remain laser-focused on our commitment to profitability and continue to work with a discipline to grow revenue and manage costs while maintaining ample cash and a strong balance sheet.

We ended the quarter with $459 million in cash, increasing by $51 million from the second quarter. With our reshaped management team focused on leveraging loanDepot's unique collection of assets, high-quality in-house servicing, scalable origination capabilities and operating leverage, we are positioned to profitably grow volume and market share in the current environment. Assuming a sustained decrease in mortgage rates, we believe we will materially improve our bottom line as the benefits of our scaled branded direct origination platform comes to bear while our investments in technology-enabled efficiency-generating initiatives will provide the foundation for additional momentum into 2026 and beyond. With that, we're ready to turn it back over to the operator for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Doug Harter with UBS.

I was hoping you could talk about your outlook for the ability to fund the growth with capital given the upcoming debt maturities and kind of the upfront capital that some growth might take and just how you're thinking about that in the current environment?

Doug, David Hayes. Yes, we feel really good about the opportunity to fund additional growth opportunities. We largely have already worked our way through sort of our renewal season for warehouse lines. We've got a great lender group there that have been very supportive of the business. And we also think there's opportunities to upsize as needed. So from the daily funding of the warehouse lines, we're in great shape from our perspective. From a capital structure perspective, we do have an -- the need to take a look at that capital structure in the coming 12 to 18 months, and that's something we're focused on, but nothing that's really going to impact how we operate day-to-day as we sit now.

Yes. Doug, it's Anthony Hsieh. Let me just add to what Dave is saying, and that is once we return to the standard of operations that has led this organization since 2010, we're very confident that we'll be able to grow market share profitably. I just want to remind the audience that we started this company with $70 billion of capital and have grown 38% year-over-year for the first 11 years of our life. So we understand what it takes to grow market share and grow profitably. This market is still highly fragmented. There is a ton of room chasing the leader in the space. So we're very enthusiastic, and we are laser-focused to stay on plan to get back into a standard of operations that allows us to be an industry-leading mortgage bank. At which point the mortgage IQ here and the origination IQ here and then having a fully diversified origination muscle in both builder, joint venture, in-market retail and direct lending, direct-to-consumer model really gives us an edge to scale up, particularly as we all hope that there'll be some growth in volume due to a more favorable interest rate cycle next year.

And I guess how do you think about the size of the MSR servicing book in that context? Is that something that you would look to grow over time -- regrow over time?

Yes. This is one of our strategic advantages, Doug. The fact that we made an investment to bring servicing in-house. And my mind desires what that was 5 years ago. So we made that investment to bring it in-house because having a direct-to-the-consumer model, our retention recapture is at an industry-leading number. So any time we put a loan in our servicing portfolio, there's an opportunity for us to double dip or have a second bite of the apple without any marketing costs or acquisition cost. So our desire is to continue to mount and increase our MSRs. But at the same time, that is -- that puts pressure on cash. So in order for us to do so, we're going to have to be able to drive down the cost of our production while waiting for the volume of this market to return.

[Operator Instructions] Your next question comes from the line of Eric Hagen with BTIG.

Maybe following up on that last point because there's all these moving pieces. Have you guys sensitized the portfolio to what the minimum level of originations might be in order to return to profitability?

So let me just make sure I have your question right. Can you rephrase your question again, please?

Yes. Have you guys sensitized the portfolio or your business to what the minimum level of originations would be in order to return to profitability?

Well, a lot of that has to do with margins, right? Margins are highly dynamic. And in our industry, as soon as that volume returns, then your margins will widen out. So if you look at our Q3 performance, it doesn't take much. So not only does when margins return, when volumes return, we're going to get both the benefit of increased volume and increased margin. So it doesn't take much at all. So we are well positioned for any sort of return.

Yes. Okay. That's helpful. When the stock got up to $4.50 back in September, did you guys consider any sort of capital raising to help maybe stabilize the capital structure a little bit more? And then if the stock got back up to that level in the future, I mean, are you prepared to put an ATM in place? Or how would you think about potentially raising capital in order to, again, stabilize the capital structure a little bit more?

Eric, it's David Hayes. So yes, of course, when the stock traded up, the valuations were at those levels, it was obviously an attractive place to look at raising capital. So we're actively looking at all sorts of ways to shore up the capital structure from potential debt refinances down the road to opportunities for an ATM or follow-on. But those discussions are in flight. So nothing we can share at this point.

Yes. It's Anthony Hsieh. So I mean the best way to combat that is with profitable market share growth. We're just going to get back to our level of comfort and what we've done in this company since 2010. So the market is well positioned for loanDepot to continue to capture market share. And we are obviously always looking at opportunities for capital. But as we continue to reposition our organization for increased originations, I think that will solve a lot of our issues going forward.

[Operator Instructions] There are no further questions at this time. I will turn the call back over to Anthony Hsieh for closing remarks.

Thank you. On behalf of Dave, Jeff, Dom and the rest of our team, I want to thank you for joining us today. The pieces are in place. We're executing a bold strategy to compete at the highest levels by returning to our core strength. Our approach is centered on retaining top talent with exceptional attitudes, deploying leading-edge technology and drive operational efficiency and innovation, delivering superior product and service levels to our customers and leveraging these assets to drive profitable market share growth. This is how we win. The disciplined focus positions us to create sustainable value for our shareholders while accelerating growth in a competitive landscape. So thanks again, everybody, and I appreciate your support.

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