Another prominent chief executive at a publicly traded Orange County company is stepping down.
Irvine-based loanDepot Inc., one of the nation’s largest non-bank providers of mortgages, announced Chief Executive Frank Martell will resign as chief executive, effective June 4 at the company’s annual stockholder meeting.
“It has been my distinct privilege to be part of Team loanDepot for the past three years and to lead the company through such an unprecedented and challenging market cycle,” Martell said in a statement. “Now is the right time to welcome a new CEO for loanDepot’s next chapter. I look forward to the company’s future success as a big fan of Team loanDepot and a significant shareholder.”
The departure was announced five days before loanDepot on March 11 reported fourth quarter revenue and profit far below what analysts expected.
The shares fell 8.7% $1.47 in the subsequent trading session; earlier that day, they hit a 52-week low of $1.27 (NYSE: LDI). The company has a $441 million market cap.
The departure also follows the exits in recent months of several prominent CEOs with headquarters in Orange County. Tom Frinzi left Staar Surgical Co. after disappointing sales while Joe Kiani departed Masimo Corp. following a proxy battle with investors. Jim Conroy of Boot Barn Holdings and Brian Niccol at Chipotle Mexican Grill Inc. both left after being offered the top jobs at larger companies.
Higher Commissions
Anthony Hsieh, who had previously started and successfully sold two mortgage companies, founded loanDepot in 2010. The company rode the interest rate drop in 2020 when sales more than tripled to $4.1 billion. LoanDepot went public in 2021, with the stock nearing $40 each and a market cap that topped $4 billion. By the beginning of 2022, it had grown to 12,000 employees.
Martell, who in 2013 won a Business Journal award for CFO of the year award while in that role for CoreLogic Inc., joined loanDepot in 2022 at a difficult time as rising interest rates caused mortgages to plummet. The company’s revenue dropped to $739 million in 2023; Martell had to lay off about 7,500 employees.
“It was just a lot of tough situations, but you know everybody in the industry was reducing,” Martell told the Business Journal in December. “We were probably the most aggressive, but we were also the most heavily weighted to refinancing, which was the sector of the market that really completely collapsed in the first quarter of 2022.”
The company cut annualized non-volume expenses by over $730 million; Martell indicated it may start hiring again to add to its 4,500 employees. At that time, Martell said “you have to be optimistic.”
However, the company on March 11 reported fourth quarter revenue was $257.5 million, short of the $310 million average estimate of two analysts. It reported an adjusted loss of 23 cents a share when analysts expected a 2-cent profit.
The unexpected loss was “due primarily to higher volume related expenses,” Chief Financial Officer David Hayes said on a conference call where he noted total expenses grew 13%, or $39 million, from the same period a year ago due to higher volume related commissions.
LoanDepot is facing severe headwinds such as the Federal Reserve hasn’t reduced benchmark interest rates as quickly as initially believed last year and the shortage of homes available for sale nationwide. Martell noted that the volume of mortgage originations approached “generational lows” in 2023 and 2024.
North Star to Rescue?
Martell three years ago implemented a plan called “Vision 2025” that included new offerings, a next-generation digital underwriting engine and an in-house servicing business.
“While a portion of Vision 2025 was successful or was focused on fundamentally resetting our cost structure and organization to better align with a much smaller market, the strategy also addressed important investments in people, process, product, and technology,” Martell said.
“I expect that these investments will enable loanDepot to emerge from the market downturn a more efficient and durable company.”
The company in November unveiled a new marketing strategy called “Project North Star” to focus on the first-time home buyer and develop a lifetime relationship where the buyer may also come back for other loans like refinancings, equity loans and reverse mortgages.
“With the announcement of a new 3-year plan, Project North Star, it is the logical time for me to make way for a new leader,” Martell said.
The Board plans to engage an executive search firm to conduct a CEO search during Martell’s transition period. If a permanent CEO has not been appointed by the time Martell’s resignation is effective on June 4, Hsieh will serve as interim CEO until a new CEO is appointed.
Hsieh is also returning as executive chairman, taking charge of originations, servicing, operations and related activities.
