loanDepot, Inc. - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File Number: 001-40003

loanDepot, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

85-3948939

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

26642 Towne Centre Drive,

Foothill Ranch,

California

92610

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (888) 337-6888

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol

Name of each exchange

on which registered

Class A Common Stock, $0.001 per value per share

LDI

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2022, 72,066,120 shares of the registrant’s Class A common stock, par value $0.001 per share, were outstanding. No shares of registrant’s Class B common stock were outstanding, 145,335,993 shares of registrant’s Class C common stock were outstanding and 97,026,671 shares of registrant’s Class D common stock were outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, including our Vision 2025 plan, technology developments, financing and investment plans, financial condition and liquidity, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” "seek," “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report with the understanding that our actual future results may be materially different from what we expect.

Important factors that could cause actual results to differ materially from our expectations are included in Part I, Item 2 “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A "Risk Factors" in this report as well as Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 18, 2022.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

loanDepot, Inc.

Table of Contents




PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021			1
Consolidated Statements of Operations for the three and nine months September 30, 2022 and 2021			2
Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021			3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			5
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures About Market Risk			54
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 3. Defaults Upon Senior Securities			58
Item 4. Mine Safety Disclosures			58
Item 5. Other Information			58
Item 6. Exhibits			58
Signatures			61

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

loanDepot, Inc.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	September 30, 2022		December 31, 2021
ASSETS	(Unaudited)
Cash and cash equivalents	$	1,143,948	$	419,571
Restricted cash	160,926		201,025
Accounts receivable, net	108,253		56,183
Loans held for sale, at fair value (includes $481,950 and $2,557,490 pledged to creditors in securitization trusts at September 30, 2022 and December 31, 2021, respectively)	2,692,820		8,136,817
Derivative assets, at fair value	316,647		194,665
Servicing rights, at fair value (includes $527,059 and $400,678 pledged to creditors in securitization trusts at September 30, 2022 and December 31, 2021, respectively)	2,030,026		2,006,712
Trading securities, at fair value	97,210		72,874
Property and equipment, net	98,944		104,262
Operating lease right-of-use assets	39,480		55,646
Prepaid expenses and other assets	115,452		140,315
Loans eligible for repurchase	554,892		363,373
Investments in joint ventures	19,938		18,553


Goodwill and intangible assets, net	—		42,317
Total assets	$	7,378,536	$	11,812,313

LIABILITIES AND EQUITY

Warehouse and other lines of credit	$	2,529,436	$	7,457,199
Accounts payable, accrued expenses and other liabilities	716,048		624,444
Derivative liabilities, at fair value	149,837		37,797
Liability for loans eligible for repurchase	554,892		363,373
Operating lease liability	66,122		71,932
Debt obligations, net	2,283,704		1,628,208
Total liabilities	6,300,039		10,182,953
Commitments and contingencies (Note 15)


Class A common stock, $0.001 par value, 2,500,000,000 authorized, 69,720,386 and 38,060,302 issued at September 30, 2022 and December 31, 2021, respectively	$	70	$	38
Class B common stock, $0.001 par value, 2,500,000,000 authorized, none issued at September 30, 2022 and December 31, 2021, respectively	—		—
Class C common stock, $0.001 par value, 2,500,000,000 authorized, 149,130,538 and 172,729,168 issued at September 30, 2022 and December 31, 2021, respectively	149		173
Class D common stock, $0.001 par value, 2,500,000,000 authorized, 97,026,671 and 100,822,084 issued at September 30, 2022 and December 31, 2021, respectively	97		101
Preferred stock, $0.001 par value, 50,000,000 authorized, none issued at September 30, 2022 and December 31, 2021, respectively	—		—
Treasury stock at cost, 1,744,319 and 1,593,366 shares at September 30, 2022 and December 31, 2021, respectively	(13,225)		(12,852)
Additional paid-in capital	778,099		565,073
Retained deficit	(265,567)		(28,976)
Noncontrolling interest	578,874		1,105,803
Total equity	1,078,497		1,629,360
Total liabilities and equity	$	7,378,536	$	11,812,313

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share amounts)
(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021




REVENUES:
Interest income	$	51,202	$	71,020	$	166,888	$	187,625
Interest expense	(41,408)		(56,785)		(121,220)		(165,130)
Net interest income	9,794		14,235		45,668		22,495

Gain on origination and sale of loans, net	156,300		821,275		665,993		2,647,328
Origination income, net	21,268		86,601		119,449		280,824
Servicing fee income	113,544		102,429		341,929		279,738
Change in fair value of servicing rights, net	(38,479)		(138,462)		(140,370)		(327,194)
Other income	11,765		37,678		53,472		116,487
Total net revenues	274,192		923,756		1,086,141		3,019,678

EXPENSES:
Personnel expense	218,819		449,152		861,382		1,523,012
Marketing and advertising expense	42,940		131,971		205,289		355,730
Direct origination expense	19,463		49,559		106,616		146,553
General and administrative expense	83,412		50,013		197,089		149,984
Occupancy expense	9,889		9,686		28,673		28,956
Depreciation and amortization	10,243		8,688		32,110		25,827
Servicing expense	14,221		22,879		46,472		76,731
Other interest expense	36,138		22,823		83,671		57,261
Goodwill impairment	—		—		40,736		—
Total expenses	435,125		744,771		1,602,038		2,364,054

(Loss) income before income taxes	(160,933)		178,985		(515,897)		655,624

Income tax (benefit) expense	(23,451)		24,708		(63,274)		47,210

Net (loss) income	(137,482)		154,277		(452,623)		608,414

Net (loss) income attributable to noncontrolling interests	(77,401)		102,802		(256,873)		503,503

Net (loss) income attributable to loanDepot, Inc.	$	(60,081)	$	51,475	$	(195,750)	$	104,911

(Loss) earnings per share:
Basic	$	(0.37)	$	0.40	$	(1.29)	$	0.82
Diluted	$	(0.37)	$	0.40	$	(1.29)	$	0.82

Weighted average shares outstanding:
Basic	162,464,369		130,297,565		151,803,928		127,941,331
Diluted	162,464,369		130,297,565		151,803,928		127,941,331

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)


	Common stock outstanding		Common stock $			Treasury Shares			Additional paid-in capital		Retained Deficit			Non-controlling Interests		Total Equity
	Class A	Class C	Class D	Class A				Class C					Class D
Balance at June 30, 2021	12,541,086	181,268,155	114,978,644	$	13	$	181		$	115	$	—		$	562,658	$	(44,821)	$	1,050,688	$	1,568,834



Deferred taxes and other tax adjustments associated with the Reorganization and IPO	—	—	—	—		—			—		—			1,717		—		—		1,717



Net issuance of common shares under stock based compensation plans	5,443,128	(5,599,513)	—	7		(5)			—		(12,844)			(2)		—		—		(12,844)
Dividends to Class A and Class D shareholders ($0.08 per share)	—	—	—	—		—			—		—			—		(4,668)		(6,095)		(10,763)
Distributions to Class C shareholders	—	—	—	—		—			—		—			—		(6,526)		(8,517)		(15,043)
Stock-based compensation	—	—	—	—		—			—		—			1,102		—		1,495		2,597
Distributions for taxes on behalf of shareholders, net	—	—	—	—		—			—		—			—		(13,279)		(17,332)		(30,611)
Net income	—	—	—	—		—			—		—			—		51,475		102,802		154,277
Balance at September 30, 2021	17,984,214	175,668,642	114,978,644	$	20	$	176		$	115	$	(12,844)		$	565,475	$	(17,819)	$	1,123,041	$	1,658,164

Balance at June 30, 2022	63,593,048	152,191,394	97,026,671	$	65	$	152		$	97	$	(13,087)		$	762,635	$	(205,235)	$	669,236	$	1,213,863
Deferred taxes and other tax adjustments related to conversions and exchanges	—	—	—	—		—			—		—			(2,092)		—		—		(2,092)
Net issuance of common stock under stock-based compensation plans	4,383,019	(3,060,856)	—	5		(3)			—		(138)			15,084		—		(15,085)		(137)
Dividends on unvested Class A RSUs	—	—	—	—		—			—		—			—		(70)		(85)		(155)
Forfeiture of accrued distributions on unvested Class C shares	—	—	—	—		—			—		—			—		139		194		333
Stock-based compensation	—	—	—	—		—			—		—			2,472				2,301		4,773
Distributions for taxes on behalf of shareholders, net	—	—	—	—		—			—		—			—		(320)		(286)		(606)
Net loss	—	—	—	—		—			—		—			—		(60,081)		(77,401)		(137,482)
Balance at September 30, 2022	67,976,067	149,130,538	97,026,671	$	70	$	149		$	97	$	(13,225)		$	778,099	$	(265,567)	$	578,874	$	1,078,497

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)


	Common stock outstanding		Common stock $			Treasury Stock			Additional paid-in capital		Retained Deficit			Non-controlling Interests		Total Equity
	Class A	Class C	Class D	Class A				Class C					Class D
Balance at December 31, 2020	—	—	—	$	—	$	—		$	—	$	—		$	—	$	—	$	1,656,613	$	1,656,613
Distributions prior to the Reorganization	—	—	—	—		—			—		—			—		—		(160,617)		(160,617)
Equity compensation prior to the Reorganization	—	—	—	—		—			—		—			—		—		338		338
Net income prior to the Reorganization	—	—	—	—		—			—		—			—		—		294,598		294,598
Deferred taxes and other tax adjustments associated with the Reorganization and IPO	—	—	—	—		—			—		—			(201,653)		—		—		(201,653)
Effect of the Reorganization	2,215,687	181,789,329	121,368,600	2		182			121		—			740,629		—		(740,934)		—
Effect of the IPO	3,850,000	(2,394,000)	(1,456,000)	4		(2)			(2)		—			—		—		—		—
Effect of the Greenshoe	577,500	(359,100)	(218,400)	1		(1)			—		—			—		—		—		—
Net issuance of common stock under stock-based compensation plans	11,341,027	(3,367,587)	(4,715,556)	13		(3)			(4)		(12,844)			(6)		—		—		(12,844)
Dividends to Class A and Class D shareholders ($0.77 per share)	—	—	—	—		—			—		—			—		(40,730)		(58,033)		(98,763)
Distributions to Class C shareholders	—	—	—	—		—			—		—			—		(63,023)		(89,885)		(152,908)
Stock-based compensation	—		—	—		—			—		—			26,505		—		37,506		64,011
Distributions for taxes on behalf of shareholders, net	—		—	—		—			—		—			—		(18,977)		(25,450)		(44,427)
Net income subsequent to the Reorganization and IPO	—		—	—		—			—		—			—		104,911		208,905		313,816
Balance at September 30, 2021	17,984,214	175,668,642	114,978,644	$	20	$	176		$	115	$	(12,844)		$	565,475	$	(17,819)	$	1,123,041	$	1,658,164

Balance at December 31, 2021	36,466,936	172,729,168	100,822,084	$	38	$	173		$	101	$	(12,852)		$	565,073	$	(28,976)	$	1,105,803	$	1,629,360
Deferred taxes and other tax adjustments related to conversions and exchanges	—	—	—	—		—			—		—			(19,835)		—		—		(19,835)
Net issuance of common stock under stock-based compensation plans	31,509,131	(23,598,630)	(3,795,413)	32		(24)			(4)		(373)			227,013		—		(227,017)		(373)
Dividends to Class A and Class D shareholders ($0.08 per share)	—	—	—	—		—			—		—			—		(5,343)		(6,481)		(11,824)
Distributions to Class C shareholders	—	—	—	—		—			—		—			—		(6,199)		(7,471)		(13,670)
Stock-based compensation	—	—	—	—		—			—		—			5,848		—		5,946		11,794
Distributions for taxes on behalf of shareholders, net	—	—	—	—		—			—		—			—		(29,299)		(35,033)		(64,332)
Net loss	—	—	—	—		—			—		—			—		(195,750)		(256,873)		(452,623)
Balance at September 30, 2022	67,976,067	149,130,538	97,026,671	$	70	$	149		$	97	$	(13,225)		$	778,099	$	(265,567)	$	578,874	$	1,078,497

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(452,623)	$	608,414
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization expense	32,110		25,827
Amortization of operating lease right-of-use asset	17,107		16,932
Amortization of debt issuance costs	12,842		9,382
Gain on origination and sale of loans	(946,506)		(2,856,544)
Gain on sale of servicing rights	(10,548)		(1,453)
Fair value change in trading securities	20,196		—
Provision for loss obligation on sold loans and servicing rights	125,047		12,400
(Decrease) increase in provision for deferred income taxes	(62,733)		37,269
Fair value change in derivative assets	32,223		312,586
Fair value change in derivative liabilities	112,040		(119,270)
Premium (paid) received on derivatives	(154,205)		4,376
Purchase of options contracts	—		(10,383)
Fair value change in loans held for sale	255,716		67,010
Fair value change in servicing rights	(180,136)		224,812
Stock-based compensation expense	11,794		64,349
Change in fair value of contingent consideration	—		(77)
Originations of loans	(46,842,973)		(107,717,154)
Proceeds from sales of loans	52,732,911		107,911,005
Proceeds from principal payments	119,708		119,822
Payments to investors for loan repurchases	(578,010)		(818,011)

Gain on extinguishment of debt	(10,528)		—
Goodwill impairment	40,736		—
Disbursements from joint ventures	8,435		8,765

Other changes in operating assets and liabilities	132,310		41,105
Net cash provided by (used in) operating activities	4,414,913		(2,058,838)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(37,613)		(43,830)
Proceeds from sale of servicing rights	689,937		332,931

Cash flows received on trading securities	5,894		617
Investments in joint ventures	(350)		(1,115)

Return of capital from joint ventures	—		189
Net cash flows provided by investing activities	657,868		288,792

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings on warehouse and other lines of credit	$	52,089,587	$	121,009,551
Repayment of borrowings on warehouse and other lines of credit	(57,017,350)		(119,374,838)

Proceeds from debt obligations	2,106,024		1,179,037
Payments on debt obligations	(1,442,931)		(477,541)
Payments of debt issuance costs	(4,555)		(15,839)
Payments for contingent consideration	—		(113)

Payments on financing lease obligation	—		(1,911)




Treasury stock purchased to net settle and withhold taxes on vested shares	(373)		(12,844)
Dividends and shareholder distributions	(118,905)		(419,732)
Net cash (used in) provided by financing activities	(4,388,503)		1,885,770

Net change in cash and cash equivalents and restricted cash	684,278		115,724

Cash and cash equivalents and restricted cash at beginning of the period	620,596		488,689

Cash and cash equivalents and restricted cash at end of the period	$	1,304,874	$	604,413


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	178,135	$	180,143
Income taxes	23,857		1,923

Supplemental disclosure of noncash investing and financing activities
Operating leases right-of-use assets obtained in exchange for lease liabilities	$	14,677	$	8,501
Trading securities retained in securitizations	50,426		57,031
Purchase of equipment under financing leases	—		168

See accompanying notes to the unaudited consolidated financial statements.

loanDepot, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ are in thousands, unless otherwise indicated)

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS, PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements were prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation were included. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of loanDepot, Inc. on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).

Nature of Operations

loanDepot, Inc. was incorporated in Delaware on November 6, 2020 to facilitate the initial public offering (“IPO”) of its Class A common stock and related transactions in order to carry on the business of LD Holdings Group, LLC (“LD Holdings”) and its consolidated subsidiaries. loanDepot, Inc.’s common stock began trading on the New York Stock Exchange on February 11, 2021 under the ticker symbol “LDI.” loanDepot, Inc. is a holding company and its sole material asset is its equity interest in LD Holdings. As of September 30, 2022 the consolidated subsidiaries of LD Holdings included loanDepot.com, LLC, (“LDLLC”), Artemis Management, LLC (“ART”), LD Settlement Services, LLC (“LDSS”), mello Holdings, LLC (“Mello”), and mello Credit Strategies LLC (“MCS”). Unless otherwise noted or indicated by the context, the term, the “Company,” refers (1) prior to the consummation of the IPO to LD Holdings and its consolidated subsidiaries, and (2) after the IPO to loanDepot, Inc. and its consolidated subsidiaries, including LD Holdings.

The Company engages in the originating, financing, selling, and servicing of residential mortgage loans, and engages in title, escrow, and settlement services for mortgage loan transactions. The Company derives income primarily from gains on the origination and sale of loans to investors, income from loan servicing, and fees charged for settlement services related to the origination and sale of loans.

Summary of Significant Accounting Policies

Our accounting policies are described below and in Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2021 Form 10-K.

Consolidation and Basis of Presentation

The Company's consolidated financial statements are prepared in accordance with U.S. GAAP as codified in the Financial Accounting Standards Board's (“FASB”) Accounting Standards Codification (“ASC” or the “Codification”).

ASC 250 requires that a change in the reporting entity or the consummation of a transaction accounted for in a manner similar to a pooling of interests, i.e., a reorganization of entities under common control, be retrospectively applied to the financial statements of all prior periods when the financial statements are issued for a period that includes the date the change in reporting entity or the transaction occurred. Prior to the IPO, the Company completed a reorganization where LLC units in LD Holdings held by certain members (“Continuing LLC Members) were exchanged on a one-for-one basis for Class A holding units (“Holdco Units”) and Class C common stock. LD Holdings continues to be a holding company and has no material assets other than its equity interests in its direct subsidiaries consisting of a 99.99% ownership in LDLLC (the majority asset of the group), and 100% equity ownership in ART, LDSS, Mello, and MCS. As a result of the IPO and reorganization, loanDepot, Inc. became a holding company, its sole material asset is its equity interest in LD Holdings and as the sole managing member of LD Holdings, loanDepot, Inc. indirectly operates and controls all of LD Holdings’ business and affairs. The IPO and reorganization were considered transactions between entities under common control. The financial results of LD Holdings and

its subsidiaries are consolidated with loanDepot, Inc, and the consolidated net earnings or loss are allocated to the noncontrolling interest to reflect the entitlement of the Continuing LLC Members.

The accompanying consolidated financial statements include all of the assets, liabilities, and results of operations of the Company and consolidated variable interest entities (“VIEs”) in which the Company is the primary beneficiary. VIEs are entities that have a total equity investment at risk that is insufficient to permit the entity to finance its activities without additional subordinated financial support, whose equity investors at risk lack the ability to control the entity's activities, or is structured with non-substantive voting rights. The Company evaluates its associations with VIEs, both at inception and when there is a change in circumstance that requires reconsideration, to determine if the Company is the primary beneficiary and consolidation is required. A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) the power to direct the activities that most significantly impact the VIEs’ economic performance, and (b) the obligation to absorb losses or receive benefits of a VIE that could potentially be significant to the VIE. The Company has not provided financial or other support during the periods presented to any VIE that it was not previously contractually required to provide. Other entities that the Company does not consolidate, but for which it has significant influence over operating and financial policies, are accounted for using the equity method. All intercompany accounts and transactions have been eliminated in consolidation.

Certain items in prior periods were reclassified to conform to the current presentation. To conform to the current period presentation, servicing expense on the consolidated statements of operations includes subservicing expense and in-house servicing expense.

The Company has evaluated subsequent events for recognition or disclosure through the date of this report and has not identified any recordable or disclosable events that were not already reported in these consolidated financial statements or notes thereto.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Management has made significant estimates in certain areas, including determining the fair value of loans held for sale, servicing rights, derivative assets and derivative liabilities, trading securities, awards granted under the incentive equity plan, determining the loan loss obligation on sold loans and MSRs, and goodwill impairment. Actual results could differ from those estimates.

Concentration of Risk

The Company has concentrated its credit risk for cash by maintaining deposits in several financial institutions, which may at times exceed amounts covered by insurance provided by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash.

Due to the nature of the mortgage lending industry, changes in interest rates may significantly impact revenue from originating mortgages and subsequent sales of loans to investors, which are the primary source of income for the Company. The Company originates mortgage loans on property located throughout the United States, with loans originated for property located in California totaling approximately 22% of total loan originations for the nine months ended September 30, 2022.

The Company sells mortgage loans to various third-party investors. Three investors accounted for 30%, 27%, and 21% of the Company’s loan sales for the nine months ended September 30, 2022. No other investors accounted for more than 5% of the loan sales for the nine months ended September 30, 2022.

The Company funds loans through warehouse and other lines of credit. As of September 30, 2022, 15% and 17% of the Company's warehouse lines were payable to two separate lenders.

NOTE 2 – FAIR VALUE

The Company's consolidated financial statements include assets and liabilities that are measured based on their estimated fair values. Refer to Note 1 - Description of Business, Presentation and Summary of Significant Accounting Policies in the 2021 Form 10-K for information on the fair value hierarchy, valuation methodologies, and key inputs used to measure financial assets and liabilities recorded at fair value, as well as methods and assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.

The following tables present the carrying amount and estimated fair value of financial instruments included in the consolidated financial statements.


	September 30, 2022
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3

Assets
Cash and cash equivalents	$	1,143,948	$	1,143,948	$	—	$	—
Restricted cash	160,926		160,926		—		—
Loans held for sale, at fair value	2,692,820		—		2,692,820		—
Derivative assets, at fair value	316,647		—		295,737		20,910
Servicing rights, at fair value	2,030,026		—		—		2,030,026
Trading securities, at fair value	97,210		—		97,210		—
Loans eligible for repurchase	554,892		—		554,892		—

Liabilities
Warehouse and other lines of credit	$	2,529,436	$	—	$	2,529,436	$	—
Derivative liabilities, at fair value	149,837		26,123		38,086		85,628
Servicing rights, at fair value	16,757		—		—		16,757
Debt obligations:
Secured credit facilities	1,092,977		—		1,094,433		—

Term Notes	199,540		—		200,000		—


Senior Notes	991,187		—		561,900		—
Liability for loans eligible for repurchase	554,892		—		554,892		—


	December 31, 2021
	Carrying Amount		Estimated Fair Value
			Level 1		Level 2		Level 3

Assets
Cash and cash equivalents	$	419,571	$	419,571	$	—	$	—
Restricted cash	201,025		201,025		—		—
Loans held for sale, at fair value	8,136,817		—		8,136,817		—
Derivative assets, at fair value	194,665		4,924		5,358		184,383
Servicing rights, at fair value	2,006,712		—		—		2,006,712
Trading securities, at fair value	72,874		—		72,874		—
Loans eligible for repurchase	363,373		—		363,373		—

Liabilities
Warehouse and other lines of credit	$	7,457,199	$	—	$	7,457,199	$	—
Derivative liabilities, at fair value	37,797		31,070		2,964		3,763
Servicing rights, at fair value	7,310		—		—		7,310
Debt obligations:
Secured credit facilities	343,759		—		345,596		—
Term Notes	199,133		—		200,000		—


Senior Notes	1,085,316		—		1,057,977		—
Liability for loans eligible for repurchase	363,373		—		363,373		—

Financial Statement Items Measured at Fair Value on a Recurring Basis

The following tables presents the Company’s assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy as of the dates indicated.


	September 30, 2022
	Recurring Fair Value Measurements of Assets and Liabilities Using:
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	2,692,820	$	—	$	2,692,820
Trading securities	—		97,210		—		97,210
Derivative assets:
Interest rate lock commitments	—		—		20,910		20,910
Forward sale contracts	—		295,737		—		295,737


Servicing rights	—		—		2,030,026		2,030,026
Total assets at fair value	$	—	$	3,085,767	$	2,050,936	$	5,136,703
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	85,628	$	85,628
Interest rate swap futures	19,480		—		—		19,480
Forward sale contracts	—		38,086		—		38,086
Put options on treasuries	6,643		—		—		6,643

Servicing rights	—		—		16,757		16,757
Total liabilities at fair value	$	26,123	$	38,086	$	102,385	$	166,594


	December 31, 2021
	Recurring Fair Value Measurements of Assets and Liabilities Using:
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Fair value through net income:
Assets:
Loans held for sale	$	—	$	8,136,817	$	—	$	8,136,817
Trading securities	—		72,874		—		72,874
Derivative assets:
Interest rate lock commitments	—		—		184,383		184,383
Forward sale contracts	—		5,358		—		5,358
Interest rate swap futures	4,924		—		—		4,924

Servicing rights	—		—		2,006,712		2,006,712
Total assets at fair value	$	4,924	$	8,215,049	$	2,191,095	$	10,411,068
Liabilities:
Derivative liabilities:
Interest rate lock commitments	$	—	$	—	$	3,763	$	3,763
Forward sale contracts	—		2,964		—		2,964
Put options on treasuries	31,070		—		—		31,070


Servicing rights	—		—		7,310		7,310

Total liabilities at fair value	$	31,070	$	2,964	$	11,073	$	45,107

The following presents the changes in the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
	IRLCs, net		Servicing Rights, net		IRLCs, net		Servicing Rights, net
Balance at beginning of period	$	57,605	$	2,204,593	$	180,620	$	1,999,402


Total net gains or losses included in earnings (realized and unrealized)	22,112		140,598		279,266		765,143
Sales and settlements

Sales			(331,922)				(751,276)
Settlements (1)	(102,686)		—		(374,144)		—
Transfers of IRLCs to closed loans	(41,749)		—		(150,460)		—
Balance at end of period	$	(64,718)	$	2,013,269	$	(64,718)	$	2,013,269

(1)Funded amount for IRLCs.


	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
	IRLCs, net		Servicing Rights, net		IRLCs, net		Servicing Rights, net
Balance at beginning of period	$	333,081	$	1,776,395	$	647,045	$	1,124,302


Total net gains or losses included in earnings (realized and unrealized)	640,372		233,166		1,749,343		1,079,525
Sales and settlements

Sales	—		(172,867)		—		(367,133)
Settlements (1)	(558,918)		—		(1,585,368)		—
Transfers of IRLCs to closed loans	(155,325)		—		(551,810)		—
Balance at end of period	$	259,210	$	1,836,694	$	259,210	$	1,836,694

(1)Funded amount for IRLCs.

The following presents the gains and losses included in earnings relating to the Company’s assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
	IRLCs, net (1)		Servicing Rights, net(2)		IRLCs, net (1)		Servicing Rights, net(3)


Total net (losses) gains included in earnings	$	(122,323)	$	140,598	$	(245,338)	$	765,143

Change in unrealized (losses) gains relating to assets and liabilities still held at period end	$	(64,718)	$	150,534	$	(64,718)	$	683,413

(1)Gains (losses) included in gain on origination and sale of loans, net.

(2)Includes $124.2 million in gains included in gain on origination and sale of loans, net and $16.4 million of gains included in change in fair value of servicing rights, net, for the three months ended September 30, 2022.

(3)Includes $574.5 million in gains included in gain on origination and sale of loans, net and $190.7 million of gains included in change in fair value of servicing rights, net, for the nine months ended September 30, 2022.














	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
	IRLCs, net (1)		Servicing Rights, net(2)		Interest Rate Lock Commitments(1)		Servicing Rights, net(3)


Total net (losses) gains included in earnings	$	(73,871)	$	233,166	$	(387,835)	$	1,079,525

Change in unrealized gains relating to assets and liabilities still held at period end	$	259,210	$	326,527	$	259,210	$	1,126,433

(1)(Losses) gains included in gain on origination and sale of loans, net.

(2)Includes $345.9 million in gains included in gain on origination and sale of loans, net and $112.7 million in losses included in change in fair value of servicing rights, net, for the three months ended September 30, 2021.

(3)Includes $1.3 billion in gains included in gain on origination and sale of loans, net and $223.4 million of losses included in change in fair value of servicing rights, net, for the nine months ended September 30, 2021.

The following table presents quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis:



	September 30, 2022				December 31, 2021
Unobservable Input	Range of inputs			Weighted Average (2)	Range of inputs			Weighted Average (2)
IRLCs:
Pull-through rate	6.2%	-	99.9%	80.2%	0.3%	-	99.3%	74.2%

Servicing rights
Discount rate(1)	4.9%	-	14.9%	6.3%	4.5%	-	9.0%	5.8%
Prepayment rate(1)	5.5%	-	19.0%	7.0%	8.4%	-	18.7%	10.2%
Cost to service (per loan)	$62	-	$143	$86	$70	-	$114	$82

(1)The Company estimates the fair value of MSRs using an option-adjusted spread (“OAS”) model, which projects MSR cash flows over multiple interest rate scenarios in conjunction with the Company’s prepayment model, and then discounts these cash flows at risk-adjusted rates.

(2)Weighted average inputs are based on the committed amounts for IRLCs and the UPB of the underlying loans for servicing rights.

Financial Statement Items Measured at Fair Value on a Nonrecurring Basis

The Company did not have any material assets or liabilities that were recorded at fair value on a non-recurring basis as of September 30, 2022 or December 31, 2021.

Financial Statement Items Measured at Amortized Cost

Warehouse and other lines of credit - The Company’s warehouse and other lines of credit bear interest at a rate that is periodically adjusted based on a market index. The carrying value of warehouse and other lines of credit approximates fair value.

Debt obligations, net - Debt consists of secured credit facilities, Term Notes, and Senior Notes. The Company’s secured credit facilities and Term Notes accrue interest at a stated base rate, plus a margin, they are highly liquid and short-term in nature and as a result, their carrying value approximated fair value as of September 30, 2022 and December 31, 2021. Fair value of the Company’s Senior Notes issued in October 2020 and March 2021 were estimated using the quoted market prices at September 30, 2022. The debt obligations are classified as Level 2 in the fair value hierarchy.

NOTE 3 – BALANCE SHEET NETTING

The Company has entered into agreements with counterparties, which include netting arrangements whereby the counterparties are entitled to settle their positions on a net basis. In certain circumstances, the Company is required to provide certain counterparties financial instruments and cash collateral against derivative financial instruments, warehouse and other lines of credit, or debt obligations. Cash collateral is held in margin accounts and included in restricted cash on the Company's consolidated balance sheets.

The table below represents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged. In circumstances where right of set off criteria is met, the related asset and liability are presented in a net position on the consolidated balance sheets. Warehouse and other lines of credit and secured debt obligations were secured by financial instruments with fair value that exceeded the liability amount recorded on the consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.


	September 30, 2022
	Gross amounts recognized		Gross amounts offset in consolidated balance sheet		Net amounts presented in consolidated balance sheet		Gross amounts not offset in consolidated balance sheet				Net amount

							Financial instruments		Cash collateral


Assets:
Forward sale contracts	$	495,444	$	199,707	$	295,737	$	—	$	(193,934)	$	101,803



Total Assets	$	495,444	$	199,707	$	295,737	$	—	$	(193,934)	$	101,803

Liabilities:
Forward sale contracts	$	237,793	$	199,707	$	38,086	$	—	$	(1,054)	$	37,032
Put options on treasuries	6,643		—		6,643		—		(6,643)		—

Interest rate swap futures	19,480		—		19,480		—		(19,480)		—
Warehouse and other lines of credit	2,529,436		—		2,529,436		(2,529,436)		—		—
Secured debt obligations (1)	1,294,433		—		1,294,433		(1,294,433)		—		—
Total Liabilities	$	4,087,785	$	199,707	$	3,888,078	$	(3,823,869)	$	(27,177)	$	37,032

(1)Secured debt obligations as of September 30, 2022 included secured credit facilities and Term Notes.


	December 31, 2021
	Gross amounts recognized		Gross amounts offset in consolidated balance sheets		Net amounts presented in consolidated balance sheets		Gross amounts not offset in consolidated balance sheets				Net amount

							Financial instruments		Cash collateral


Assets:
Forward sale contracts	$	29,497	$	(24,139)	$	5,358	$	—	$	(1,447)	$	3,911

Interest rate swap futures	4,924		—		4,924		—		—		4,924
Total Assets	$	34,421	$	(24,139)	$	10,282	$	—	$	(1,447)	$	8,835

Liabilities:
Forward sale contracts	$	27,103	$	(24,139)	$	2,964	$	—	$	(1,736)	$	1,228
Put options on treasuries	31,070		—		31,070		—		—		31,070

Warehouse and other lines of credit	7,457,199		—		7,457,199		(7,457,199)		—		—
Secured debt obligations (1)	545,596		—		545,596		(545,596)		—		—
Total Liabilities	$	8,060,968	$	(24,139)	$	8,036,829	$	(8,002,795)	$	(1,736)	$	32,298

(1)Secured debt obligations as of December 31, 2021 included secured credit facilities and Term Notes.

NOTE 4 – LOANS HELD FOR SALE, AT FAIR VALUE

The following table represents the unpaid principal balance of LHFS by product type of loan as of September 30, 2022 and December 31, 2021:



	September 30, 2022				December 31, 2021
	Amount		%		Amount		%
Conforming - fixed	$	1,696,438	60	%	$	4,881,222	61	%
Conforming - ARM	33,501		1		351,408		4
Government - fixed	895,256		32		1,156,890		15
Government - ARM	2,509		—		10,906		—
Other - residential mortgage loans	187,200		7		1,576,858		20
Consumer loans	1,797		—		1,942		—
	2,816,701		100	%	7,979,226		100	%
Fair value adjustment	(123,881)				157,591
Total	$	2,692,820			$	8,136,817

A summary of the changes in the balance of loans held for sale is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Balance at beginning of period	$	4,656,338	$	9,120,653	$	8,136,817	$	6,955,424
Origination and purchase of loans	9,700,119		31,902,260		46,842,973		107,717,154
Sales	(11,728,053)		(32,200,708)		(52,409,647)		(106,414,376)
Repurchases	164,435		138,666		498,101		802,366
Principal payments	(18,822)		(53,316)		(119,708)		(119,822)
Fair value loss	(81,197)		(33,819)		(255,716)		(67,010)
Balance at end of period	$	2,692,820	$	8,873,736	$	2,692,820	$	8,873,736

Gain on origination and sale of loans, net is comprised of the following components:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
(Discount) premium from loan sales	$	(83,312)	$	674,782	$	(756,602)	$	1,552,668
Servicing rights additions	124,244		345,882		574,459		1,302,884
Unrealized gains (losses) from derivative assets and liabilities	113,913		42,984		82,110		(139,483)
Realized gains (losses) from derivative assets and liabilities	37,950		(156,514)		940,824		194,035
Discount points, rebates and lender paid costs	57,634		(49,585)		189,468		(193,043)
Fair value loss	(81,197)		(33,818)		(255,716)		(67,010)
Provision for loan loss obligation for loans sold	(12,932)		(2,456)		(108,550)		(2,723)
Total gain on origination and sale of loans, net	$	156,300	$	821,275	$	665,993	$	2,647,328

The Company had $19.6 million and $28.8 million of loans held for sale on non-accrual status as of September 30, 2022 and December 31, 2021, respectively.

NOTE 5 – SERVICING RIGHTS, AT FAIR VALUE

The outstanding principal balance of the servicing portfolio was comprised of the following:


	September 30, 2022		December 31, 2021
Conventional	$	103,719,089	$	127,270,097
Government	35,990,544		34,842,868
Total servicing portfolio	$	139,709,633	$	162,112,965

A summary of the unpaid principal balance underlying servicing rights is as follows:


	September 30, 2022		December 31, 2021
Current loans	$	137,990,039	$	160,302,966
Loans 30 - 89 days delinquent	572,209		504,467
Loans 90 or more days delinquent or in foreclosure	1,147,385		1,305,532
Total servicing portfolio (1)	$	139,709,633	$	162,112,965

(1)At September 30, 2022 and December 31, 2021 0.2% and 0.6%, respectively, of the servicing portfolio was in forbearance as a result of payment relief efforts afforded to borrowers as a result of the Coronavirus Aid, Relief, and Economic Security Act and other regulatory guidance.

A summary of the changes in the balance of servicing rights, net of servicing rights liability is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Balance at beginning of period	$	2,204,593	$	1,776,395	$	1,999,402	$	1,124,302
Additions	124,244		345,882		574,459		1,302,884
Sales proceeds, net	(341,415)		(182,892)		(740,728)		(365,680)
Changes in fair value:
Due to changes in valuation inputs or assumptions	75,366		(3,461)		373,158		98,295
Due to collection/realization of cash flows	(49,519)		(99,230)		(193,022)		(323,107)
Balance at end of period	$	2,013,269	$	1,836,694	$	2,013,269	$	1,836,694

The following is a summary of the components of loan servicing fee income as reported in the Company’s consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Contractual servicing fees	$	104,917	$	99,640	$	327,567	$	271,374
Late, ancillary and other fees	8,627		2,789		14,362		8,364
Servicing fee income	$	113,544	$	102,429	$	341,929	$	279,738

The following is a summary of the components of change in fair value of servicing rights, net as reported in the Company’s consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Changes in fair value:
Due to changes in valuation inputs or assumptions	$	75,366	$	(3,461)	$	373,158	$	98,295
Due to collection/realization of cash flows	(49,519)		(99,230)		(193,022)		(323,107)
Realized losses on sales of servicing rights	(13,489)		(14,218)		(5,949)		(8,224)
Net loss from derivatives hedging servicing rights	(50,837)		(21,553)		(314,557)		(94,158)
Changes in fair value of servicing rights, net	$	(38,479)	$	(138,462)	$	(140,370)	$	(327,194)

The table below illustrates hypothetical changes in fair values of servicing rights, caused by assumed immediate changes to key assumptions that are used to determine fair value.


	September 30, 2022		December 31, 2021
Fair Value of Servicing Rights, net	$	2,013,269	$	1,999,402
Change in Fair Value from adverse changes:
Discount Rate:
Increase 1%	(81,235)		(85,066)
Increase 2%	(156,903)		(163,255)
Cost of Servicing:
Increase 10%	(18,990)		(20,843)
Increase 20%	(38,066)		(41,727)
Prepayment Speed:
Increase 10%	(17,625)		(76,532)
Increase 20%	(35,139)		(148,556)

Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. Also, the effect of a variation in a particular assumption is calculated without changing any other assumption, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in servicing rights values may differ significantly from those displayed above.

NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Derivatives instruments utilized by the Company primarily include interest rate lock commitments, forward sale contracts, MBS put options, put options on treasuries, and interest rate swap futures. Derivative financial instruments are recognized as assets or liabilities and are measured at fair value. The Company accounts for derivatives as free-standing derivatives and does not designate any derivative financial instruments for hedge accounting. All derivative financial instruments are recognized on the consolidated balance sheets at fair value with changes in the fair values being reported in current period earnings. The Company does not use derivative financial instruments for purposes other than in support of its risk management activities. Refer to Note 1- Description of Business, Presentation and Summary of Significant Accounting Policies and Note 3- Fair Value for further details on derivatives in the 2021 Form 10-K.

The following summarizes the Company’s outstanding derivative instruments:


				Fair Value
	Notional		Balance Sheet Location	Asset		Liability
September 30, 2022:
Interest rate lock commitments	$	1,645,122	Derivative asset, at fair value	$	20,910
Interest rate lock commitments	3,171,270		Derivative liabilities, at fair value	—		85,628

Forward sale contracts	20,523,121		Derivative asset, at fair value	295,737		—
Forward sale contracts	896,425		Derivative liabilities, at fair value	—		38,086

Put options on treasuries	—		Derivative asset, at fair value	—		—
Put options on treasuries	1,725		Derivative liabilities, at fair value	—		6,643




Interest rate swap futures	—		Derivative asset, at fair value	—		—
Interest rate swap futures	650		Derivative liabilities, at fair value	—		19,480
			Total derivative financial instruments	$	316,647	$	149,837


				Fair Value
	Notional		Balance Sheet Location	Asset		Liability
December 31, 2021:
Interest rate lock commitments	$	11,530,721	Derivative asset, at fair value	$	184,383	$	—
Interest rate lock commitments	1,125,911		Derivative liabilities, at fair value	—		3,763

Forward sale contracts	19,482,705		Derivative asset, at fair value	5,358		—
Forward sale contracts	13,171,462		Derivative liabilities, at fair value	—		2,964

Put options on treasuries	—		Derivative asset, at fair value	—		—
Put options on treasuries	16,980		Derivative liabilities, at fair value	—		31,070

Interest rate swap futures	2,640		Derivative asset, at fair value	4,924		—
Interest rate swap futures	—		Derivative liabilities, at fair value	—		—
			Total derivative financial instruments	$	194,665	$	37,797

Because many of the Company’s current derivative agreements are not exchange-traded, the Company is exposed to credit loss in the event of nonperformance by the counterparty to the agreements. The Company controls this risk through credit monitoring procedures including financial analysis, dollar limits and other monitoring procedures. The notional amount of the contracts does not represent the Company’s exposure to credit loss.

The following summarizes the realized and unrealized net gains or losses on derivative financial instruments and the consolidated statements of operations line items where such gains and losses are included:


		Three Months Ended September 30,				Nine Months Ended September 30,
Derivative instrument	Statements of Operations Location	2022		2021		2022		2021
Interest rate lock commitments, net	Gain on origination and sale of loans, net	$	(122,323)	$	(73,871)	$	(245,338)	$	(387,835)
Forward sale contracts	Gain on origination and sale of loans, net	259,360		(29,867)		1,221,817		477,215
Interest rate swap futures	Gain on origination and sale of loans, net	2,279		(29,683)		(82,251)		(81,891)
Put options	Gain on origination and sale of loans, net	12,547		19,891		128,706		47,063
Forward sale contracts	Change in fair value of servicing rights, net	(16,293)		(5,838)		(113,920)		(84,842)
Interest rate swap futures	Change in fair value of servicing rights, net	(31,598)		(14,033)		(197,177)		(6,855)
Put options	Change in fair value of servicing rights, net	(2,946)		(1,682)		(3,460)		(2,461)
Total realized and unrealized gains (losses) on derivative financial instruments		$	101,026	$	(135,083)	$	708,377	$	(39,606)

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET

A summary of the Company’s activity related to goodwill is as follows.


	Goodwill		Other intangible assets		Total
Balance, December 31, 2021	$	40,736	$	1,581	$	42,317
Amortization	—		(205)		(205)
Impairment loss	(40,736)		(1,376)		(42,112)
Balance, September 30, 2022	$	—	$	—	$	—


	Goodwill		Other intangible assets		Total
Balance, December 31, 2020	$	40,736	$	2,090	$	42,826
Amortization	—		(255)		(255)
Balance September 30, 2021	$	40,736	$	1,835	$	42,571

The Company performs its annual assessment of possible impairment of goodwill and intangible assets as of December 31, or more frequently if events and circumstances indicate that impairment may have occurred. The Company compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

During the second quarter of 2022, the Company performed an interim impairment test due to the impact of rising interest rates on the mortgage industry and the Company’s recent stock performance. The evaluation of goodwill included a market based and income based approach. Based upon the results of this evaluation, an impairment charge of $40.7 million was recognized, driven predominantly by a significant decline in our market capitalization.

In addition to goodwill, the Company had other intangible assets related to trademarks associated with prior acquisitions. The Company reviews intangible assets for possible impairment whenever events or circumstances indicate that

carrying amounts may not be recoverable. The factors outlined in the goodwill impairment discussion above triggered an interim impairment evaluation of other intangible assets during the second quarter of 2022. Based upon the results of this evaluation, an impairment charge of $1.4 million was recognized.

NOTE 8 – VARIABLE INTEREST ENTITIES

The determination of whether the assets and liabilities of the VIEs are consolidated or not consolidated in the consolidated balance sheets depends on the terms of the related transaction and the Company’s continuing involvement, if any, with the VIE. The Company is deemed the primary beneficiary and therefore consolidates VIEs for which it has both (a) the power, through voting rights or similar rights, to direct the activities that most significantly impact the VIE's economic performance, and (b) benefits, as defined, from the VIE. The Company determines whether it holds a significant variable interest in a VIE based on a consideration of both qualitative and quantitative factors regarding the nature, size, and form of its involvement with the VIE. The Company assesses whether it is the primary beneficiary of a VIE on an ongoing basis. The Company did not provide any non-contractual financial support to VIEs for the nine months ended September 30, 2022 and year ended December 31, 2021.

Consolidated VIEs

The Company is a holding company, its sole material asset is its equity interest in LD Holdings and as the sole managing member of LD Holdings, the Company indirectly operates and controls all of LD Holdings’ business and affairs. LD Holdings is considered a VIE and the financial results of LD Holdings and its subsidiaries are consolidated. A portion of net earnings or loss is allocated to noncontrolling interest to reflect the entitlement of the Continuing LLC Members.

The Company is involved in several types of securitization and financing transactions that utilize special purpose entities (“SPEs”). The Company’s principal use of SPEs is to obtain liquidity by securitizing certain of its financial and non-financial assets. SPEs involved in the Company’s securitization and other financing transactions are often considered VIEs.

The Company consolidates securitization facilities that finance mortgage loans held for sale, and SPEs established as trusts to finance mortgage servicing rights and servicing advance receivables. The Company sells assets to a securitization or trust, which issue beneficial interests that are collateralized by the transferred assets and entitle the investors to specified cash flows generated therefrom. The Company may retain beneficial interests in the assets sold. The Company also holds certain conditional repurchase options specific to these securitizations that allow it to repurchase assets from the securitization entity. The Company’s economic exposure to loss from outstanding third-party financing is generally limited to the carrying value of the assets financed. The Company has retained risks in the securitizations including customary representations and warranties. For securitization facilities, the Company, as seller, has an option to prepay and redeem outstanding classes of issued notes after a set time period has elapsed. The Company’s exposure to these entities is primarily through its role as seller, servicer, and administrator. Servicing functions include, but are not limited to, general collection activity, preparing and furnishing statements, and loss mitigation efforts including repossession and sale of collateral.

The Company sells mortgage loans to investors through private label securitizations which are accounted for either as sales or secured borrowings. The Company may retain economic interests in the securitized and sold assets, which are generally retained in the form of senior or subordinated interests, residual interests, and/or servicing rights. The Company evaluates its interests in each private label securitization for classification as a VIE. The Company accounts for a securitization as a sale when it has relinquished control over the transferred financial assets and does not hold other interests in the VIE that individually, or in the aggregate, would absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns. The Company has an option to exercise a cleanup call to purchase the remaining mortgage loans and any trust property when the remaining aggregate principal balance is less than 10% of the initial aggregate principal balance.

The table below presents a summary of the carrying value and balance sheet classification of assets and liabilities in the Company’s securitization and SPE VIEs


	September 30, 2022		December 31, 2021

Assets
Loans held for sale, at fair value	$	481,950	$	2,557,490
Restricted cash	21,634		100,494
Servicing rights, at fair value	527,059		400,678
Prepaid expenses and other assets	34,711		17,756
	$	1,065,354	$	3,076,418

Liabilities
Warehouse and other lines of credit	$	500,000	$	2,600,000
Debt obligations, net:
MSR Facilities	116,874		15,000
Servicing advance facilities	30,677		15,070
Term notes	199,540		199,133

	$	847,091	$	2,829,203

Non-Consolidated VIEs

The nature, purpose, and activities of non-consolidated VIEs currently encompass the Company’s investments in retained interests from securitizations and joint ventures. The table below presents a summary of the nonconsolidated VIEs for which the Company holds variable interests.


	September 30, 2022
	Carrying value				Maximum exposure to loss		Total assets in VIEs
	Assets		Liabilities
Retained interests	$	97,210	$	—	$	97,210	$	2,340,730
Investments in joint ventures	19,938		—		19,938		17,605
	$	117,148	$	—	$	117,148

	December 31, 2021
	Carrying value				Maximum exposure to loss		Total assets in VIEs
	Assets		Liabilities
Retained interests	$	72,874	$	—	$	72,874	$	1,424,857
Investments in joint ventures	18,553		—		18,553		20,783
	$	91,427	$	—	$	91,427

Retained interests

In 2022 and 2021, the Company completed the sale and securitization of non-owner occupied residential mortgage loans. Pursuant to the credit risk retention requirements, the Company, as sponsor, is required to retain at least a 5% economic interest in the credit risk of the assets collateralizing the securitization transactions. The retained interests represent a variable interest in the securitizations. The Company determined it was not the primary beneficiary of the VIE. The Company’s continuing involvement is limited to customary servicing obligations as servicing administrator associated with retained servicing rights and the receipt of principal and interest associated with the retained interests. The investors and the securitization trusts have no recourse to the Company’s assets; holders of the securities issued by each trust can look only to the loans owned by the trust for payment. The retained interests held by the Company are subject principally to the credit risk stemming from the underlying transferred loans. The securitization trusts used to effect these transactions are variable interest entities that the Company does not consolidate. The Company remeasures the carrying value of its retained interests at each reporting date to reflect their current fair value which is included in trading securities, at fair value on the consolidated balance sheets, with corresponding gains or losses included in other income on the consolidated income statements. As of September 30, 2022, the remaining principal balance of loans transferred to these securitization trusts was $2.3 billion of which $1.6 million was 90 days or more past due.

Investments in joint ventures

The Company’s joint ventures include investments with home builders, real estate brokers, and commercial real estate companies to provide loan origination services and real estate settlement services to customers referred by the Company’s joint venture partners. The Company is generally not determined to be the primary beneficiary in its joint venture VIEs because it does not have the power, through voting rights or similar rights, to direct the activities that most significantly impact the economic performance of the VIE. The Company’s pro rata share of net earnings of joint ventures was $4.6 million and $10.8 million for the three and nine months ended September 30, 2022, respectively, and $3.0 million and $8.1 million for the three and nine months ended September 30, 2021, respectively, and is included in other income in the consolidated statements of operations.

NOTE 9 – WAREHOUSE AND OTHER LINES OF CREDIT

At September 30, 2022, the Company was a party to 10 revolving lines of credit with lenders providing $5.7 billion of warehouse and securitization facilities. The facilities are used to fund, and are secured by, residential mortgage loans held for sale. The facilities are repaid using proceeds from the sale of loans. Interest is generally payable monthly in arrears or on the repurchase date of a loan, and outstanding principal is payable upon receipt of loan sale proceeds or on the repurchase date of a loan. Outstanding principal related to a particular loan must also be repaid after the expiration of a contractual period of time or, if applicable, upon the occurrence of certain events of default with respect to the underlying loan. Interest expense is recorded to interest expense on the consolidated statements of operations. The base interest rates on the facilities bear interest at 30-day LIBOR, or other alternative base rate such as SOFR, plus a margin. Some of the facilities carry additional fees charged on the total line amount, commitment fees charged on the committed portion of the line, and non-usage fees charged when monthly usage falls below a certain utilization percentage. As of September 30, 2022, the interest rate was comprised of the applicable base rate plus a spread ranging from 1.37% to 2.25%. The base interest rate for warehouse facilities is subject to increase based upon the characteristics of the underlying loans collateralizing the lines of credit, including, but not limited to product type and number of days held for sale. The warehouse lines are scheduled to expire through 2023 under one or two year terms. As of September 30, 2022 there was one securitization facility with an original three year term scheduled to expire in 2024. All warehouse lines and other lines of credit are subject to renewal based on an annual credit review conducted by the lender.

Certain warehouse line lenders require the Company to maintain cash accounts with minimum required balances at all times. As of September 30, 2022 and December 31, 2021, there was $5.5 million and $8.0 million, respectively, held in these accounts which are recorded as a component of restricted cash on the consolidated balance sheets.

Under the terms of these warehouse lines, the Company is required to maintain various financial and other covenants. As of September 30, 2022, the Company amended certain warehouse lines related to certain profitability covenants, following which the Company was in compliance with those financial covenants.

Securitization Facilities

In October 2020, the Company issued notes and a class of owner trust certificates through a securitization facility (“2020-1 Securitization Facility”) backed by a revolving warehouse line of credit. The 2020-1 Securitization Facility was secured by newly originated, first-lien, residential mortgage loans eligible for purchase by Fannie Mae and Freddie Mac for the purchase of mortgage loans or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans. The 2020-1 Securitization Facility issued $600.0 million in notes and certificates that accrued interest at 30-day LIBOR plus a margin. In March 2022, the Company exercised its right to optional prepayment in full and terminated the 2020-1 Securitization Facility.

In December 2020, the Company issued notes and a class of owner trust certificates through an additional securitization facility (“2020-2 Securitization Facility”) backed by a revolving warehouse line of credit. The 2020-2 Securitization Facility was secured by newly originated, first-lien, fixed rate residential mortgage loans eligible for purchase by the GSEs or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans. The 2020-2 Securitization Facility issued $500.0 million in notes and certificates that accrued interest at 30-day LIBOR plus a margin. In August 2022, the Company exercised its right to optional prepayment in full and terminated the 2020-2 Securitization Facility.

In February 2021, the Company issued notes and a class of owner trust certificates through an additional securitization facility (“2021-1 Securitization Facility”) backed by a revolving warehouse line of credit. The 2021-1 Securitization Facility was secured by newly originated, first-lien, fixed-rate or adjustable-rate, residential mortgage loans originated in accordance with the criteria of Fannie Mae and Freddie Mac for the purchase of mortgage loans or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans. The 2021-1 Securitization Facility issued $500.0 million in notes that accrued interest at 30-day LIBOR plus a margin. In September 2022, the Company exercised its right to optional prepayment in full and terminated the 2021-1 Securitization Facility.

In April 2021, the Company issued notes and a class of owner trust certificates through an additional securitization facility (“2021-2 Securitization Facility”) backed by a revolving warehouse line of credit. The 2021-2 Securitization Facility was secured by newly originated, first-lien, fixed-rate or adjustable-rate, residential mortgage loans originated in accordance with the criteria of Fannie Mae and Freddie Mac for the purchase of mortgage loans or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans. The 2021-2 Securitization Facility issued $500.0 million in notes that accrued interest at 30-day LIBOR, plus a margin. In September 2022, the Company exercised its right to optional prepayment in full and terminated the 2021-2 Securitization Facility.

In October 2021, the Company issued notes and a class of owner trust certificates through an additional securitization facility (“2021-3 Securitization Facility”) backed by a revolving warehouse line of credit. The 2021-3 Securitization Facility is secured by newly originated, first-lien, fixed-rate or adjustable-rate, residential mortgage loans originated in accordance with the criteria of Fannie Mae and Freddie Mac for the purchase of mortgage loans or in accordance with the criteria of Ginnie Mae for the guarantee of securities backed by mortgage loans. The 2021-3 Securitization Facility issued $500.0 million in notes that bear interest at 30-day LIBOR, or other alternative base rate such as SOFR, plus a margin. The 2021-3 Securitization Facility will terminate on the earlier of (i) the three-year anniversary of the initial purchase date, (ii) the Company exercising its right to optional prepayment in full, and (iii) the date of the occurrence and continuance of an event of default.

The following table presents information on warehouse and securitization facilities and the outstanding balance as of September 30, 2022 and December 31, 2021:




								Outstanding Balance
	Committed Amount		Uncommitted Amount		Total Facility Amount		Expiration Date	September 30, 2022		December 31, 2021
Facility 1(1)	$	400,000	$	1,100,000	$	1,500,000	10/29/2022	$	441,230	$	851,088
Facility 2(2)	—		300,000		300,000		9/25/2023	172,313		295,743
Facility 3	—		300,000		300,000		4/18/2023	290,197		459,018
Facility 4	—		450,000		450,000		11/14/2022	226,888		266,230
Facility 5(2)	—		200,000		200,000		N/A	92		391
Facility 6(2)	100,000		500,000		600,000		9/29/2023	310,042		583,449
Facility 7(3)	400,000		400,000		800,000		5/5/2023	382,952		1,410,367


Facility 8	—		750,000		750,000		N/A	25,113		361,783
Facility 9(4)(5)	—		—		—		10/25/2022	—		600,000
Facility 10(4)(7)	—		—		—		12/17/2023	—		500,000
Facility 11(2)(6)	—		—		—		9/23/2022	—		263,516

Facility 12(4)(8)	—		—		—		2/2/2024	—		500,000
Facility 13(4)(8)	—		—		—		4/23/2024	—		500,000
Facility 14	—		300,000		300,000		9/21/2023	180,609		365,614
Facility 15(4)	500,000		—		500,000		10/21/2024	500,000		500,000
Total	$	1,400,000	$	4,300,000	$	5,700,000		$	2,529,436	$	7,457,199

(1)The total facility is available both to fund loan originations and also provide liquidity under a gestation facility to finance recently sold MBS up to the MBS settlement date. In October 2022, this facility was extended to October 2023.

(2)In addition to the warehouse line, the lender provides a separate gestation facility to finance recently sold MBS up to the MBS settlement date.

(3)In addition to the outstanding balance secured by mortgage loans, the Company has $116.9 million outstanding to finance servicing rights included within debt obligations in the consolidated balance sheets.

(4)Securitization backed by a revolving warehouse facility to finance newly originated first-lien fixed and adjustable rate mortgage loans.

(5)This facility was prepaid and terminated in March 2022.

(6)This facility was prepaid and terminated in July 2022.

(7)This facility was prepaid and terminated in August 2022.

(8)This facility was prepaid and terminated in September 2022.

The following table presents information on borrowings under warehouse and securitization facilities:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Maximum outstanding balance during the period	$	4,354,864		$	9,078,257		$	7,672,559		$	9,180,276
Average balance outstanding during the period	3,417,252			8,515,189			4,868,397			8,066,303
Collateral pledged (loans held for sale)	2,566,330			8,675,750			2,566,330			8,675,750
Weighted average interest rate during the period	4.18		%	2.22		%	2.89		%	2.25		%

NOTE 10 – DEBT OBLIGATIONS

The following table presents the outstanding debt as of September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
Secured debt obligations, net:
Secured credit facilities
MSR facilities	$	969,048	$	262,250
Securities financing facilities	93,252		66,439
Servicing advance facilities	30,677		15,070
Total secured credit facilities	1,092,977		343,759
Term Notes	199,540		199,133

Total secured debt obligations, net	1,292,517		542,892
Unsecured debt obligations, net:


Senior Notes	991,187		1,085,316

Total debt obligations, net	$	2,283,704	$	1,628,208

Certain of the Company’s secured debt obligations require us to satisfy financial covenants including minimum levels of profitability, tangible net worth, liquidity, and maximum levels of consolidated leverage. The Company obtained amendments relating to certain profitability covenants. As a result, the Company was in compliance with all such financial covenants as of September 30, 2022.

Secured Credit Facilities

Secured credit facilities are revolving facilities collateralized by MSRs, trading securities, and servicing advances.

MSR Facilities

In October 2014, the Company entered into a $25.0 million credit facility to finance servicing rights and for other working capital needs and general corporate purposes. The Company has entered into subsequent amendments to increase and decrease the size of the facility and extend the maturity date. The facility is secured by Freddie Mac mortgage servicing rights with a fair value of $289.6 million as of September 30, 2022 and accrues interest at a base rate per annum of 30-day LIBOR, or other alternative base rate such as SOFR, plus a margin. As of September 30, 2022, there was $205.5 million outstanding on this facility with a maturity of June 2023. At September 30, 2022, capacity under the facility was $268.0 million. Advances for servicing rights are determined using a borrowing base formula calculated against the fair market value of the pledged servicing rights.

In December 2021, the Company entered into a credit facility agreement which provides $300.0 million in borrowing capacity, with an option to increase up to $500.0 million upon mutual consent, available to the Company. The facility is secured by Freddie Mac mortgage servicing rights with a fair value of $526.6 million as of September 30, 2022, and bears interest at 30-day LIBOR, or other alternative base rate such as SOFR, plus a margin per annum. At September 30, 2022, there was $300.0 million outstanding on this facility and $0.2 million in unamortized deferred financing costs.

In January 2022, the Company entered into a credit facility agreement which provides $500.0 million in borrowing capacity. The facility is secured by Fannie Mae mortgage servicing rights with a fair value of $621.4 million as of September 30, 2022 and bears interest at SOFR plus a margin per annum. At September 30, 2022, there was $348.0 million outstanding on this facility and $1.1 million in unamortized deferred financing costs.

In August 2017, the Company established the GMSR Trust to finance Ginnie Mae mortgage servicing rights owned by the Company through issuance of either variable funding notes or term notes, in each case secured by participation certificates held by the GMSR Trust. As of September 30, 2022, the Company had pledged participation certificates representing beneficial interests in Ginnie Mae mortgage servicing rights to the GMSR Trust with a fair value of $527.1 million. At September 30,

2022 the maximum borrowing capacity of the variable funding notes was $200.0 million. The variable funding notes bear interest at SOFR plus a margin per annum and mature in May 2023. As of September 30, 2022, there were $116.9 million in variable funding notes outstanding to finance Ginnie Mae mortgage servicing rights owned by the Company.

Securities Financing Facilities

The Company has entered into master repurchase agreements to finance retained interest securities related to its securitizations. The securities financing facilities have an advance rate between 60% and 90% based on classes of the securities and accrue interest at a rate of 90-day SOFR, plus a margin. The securities financing facilities are secured by the trading securities which represent our retained interests in the credit risk of the assets collateralizing certain securitization transactions. As of September 30, 2022, the trading securities had a fair value of $97.2 million on the consolidated balance sheets and there were $93.3 million in securities financing facilities outstanding.

Servicing Advance Facilities

In September 2020, the Company, through its indirect-wholly owned subsidiary loanDepot Agency Advance Receivables Trust (the “Advance Receivables Trust”), entered into a variable funding note facility for the financing of servicing advance receivables with respect to residential mortgage loans serviced by it on behalf of Fannie Mae and Freddie Mac. Pursuant to an indenture, the Advance Receivables Trust can issue up to $100.0 million in variable funding notes (the “2020-VF1 Notes”). The 2020-VF1 Notes accrue interest at SOFR, plus a margin per annum and mature in September 2023 (unless earlier redeemed in accordance with their terms). At September 30, 2022, there was $15.7 million in 2020-VF1 Notes outstanding.

In November 2021, the Company, through the GMSR Trust issued variable funding notes secured by principal and interest advance receivables and servicing advance receivables with respect to residential mortgage loans serviced on behalf of Ginnie Mae. The variable funding notes bear interest at SOFR plus a margin per annum and mature in May 2023. As of September 30, 2022, there was $15.1 million outstanding on the variable funding notes and $0.2 million in unamortized deferred financing costs.

Term Notes

In October 2018, the Company, through the GMSR Trust issued the Series 2018-GT1 Term Notes (“Term Notes”). The Term Notes accrue interest at 30-day LIBOR, or other alternative base rate such as SOFR, plus a margin per annum and mature in October 2023 or, if extended pursuant to the terms of the related indenture supplement, October 2025 (unless earlier redeemed in accordance with their terms). At September 30, 2022, there was $200.0 million in Term Notes outstanding and $0.5 million in unamortized deferred financing costs.

Senior Notes

In October 2020, the Company issued $500.0 million in aggregate principal amount of 6.50% senior unsecured notes due 2025, (the “2025 Senior Notes”). The 2025 Senior Notes will mature on November 1, 2025. Interest on the 2025 Senior Notes accrues at a rate of 6.50% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The Company may redeem the 2025 Senior Notes, in whole or in part, at various redemption prices. At September 30, 2022, there was $500.0 million in 2025 Senior Notes outstanding and $5.5 million in unamortized deferred financing costs.

In March 2021, the Company issued $600.0 million in aggregate principal amount of 6.125% senior unsecured notes due 2028 (the “2028 Senior Notes” and together with the 2025 Senior Notes, the "Senior Notes"). The 2028 Senior Notes will mature on April 1, 2028. Interest on the 2028 Senior Notes accrues at a rate of 6.125% per annum, payable semi-annually in arrears on April 1 and October 1 of each year. At any time prior to April 1, 2024, the Company may redeem some or all of the 2028 Senior Notes at a price equal to 100% of the principal amount of the 2028 Senior Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption plus a make-whole premium. During the first quarter of 2022, the Company repurchased $97.5 million of 2028 Senior Notes at an average purchase price of 87.9% of par which resulted in a $10.5 million gain on extinguishment of debt recorded in other interest expense on the consolidated statement of operations. The Company

may also redeem the 2028 Senior Notes, in whole or in part, at any time on or after April 1, 2024 at various redemption prices. In addition, subject to certain conditions at any time prior to April 1, 2024, the Company may redeem up to 40% of the principal amount of the 2028 Senior Notes with the proceeds of certain equity offerings at a redemption price of 106.125% of the principal amount of the 2028 Senior Notes, together with accrued and unpaid interest, if any, to, but not including, the date of redemption. At September 30, 2022, there was $502.5 million in 2028 Senior Notes outstanding and $5.8 million in unamortized deferred financing costs.

Interest Expense

Interest expense on all outstanding debt obligations with variable rates is paid based on LIBOR, or other alternative base rate such as SOFR, plus a margin ranging from 0.70% - 3.50%.

NOTE 11 – INCOME TAXES

The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure. As part of the completion of the IPO, the Company became a C Corporation subject to federal, state, and local income taxes with respect to its share of net taxable income of LD Holdings.

As of September 30, 2022 and December 31, 2021, the Company had a deferred tax asset before any valuation allowance of $0.1 million and $0.4 million, respectively, and a deferred tax liability of $135.2 million and $193.4 million, respectively. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. The deferred tax liability as of September 30, 2022 and December 31, 2021 relate to temporary differences in the book basis as compared to the tax basis of loanDepot, Inc.’s investment in LD Holdings, net of tax benefits from future deductions for payments made under a Tax Receivable Agreement (“TRA”) as a result of the IPO. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company’s effective tax rate in the future. Deferred income taxes are measured using the applicable tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on the tax rates that have been enacted at the reporting date. The Company measured its deferred tax assets and liabilities at September 30, 2022 and December 31, 2021 using the combined federal and state rate (less federal benefit) of 26%. The Company establishes a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2022, the Company did not have a valuation allowance on any deferred tax assets as the Company believes it is more-likely-than-not that the Company will realize the benefits of the deferred tax assets. The Company recognized a TRA liability of $47.8 million and $32.9 million as of September 30, 2022 and December 31, 2021, respectively, which represents the Company’s estimate of the aggregate amount that it will pay under the TRA, refer to Note 15- Commitments and Contingencies, for further information on the TRA liability.

NOTE 12 – RELATED PARTY TRANSACTIONS

In conjunction with its joint ventures, the Company entered into agreements to provide services to joint ventures for which it receives and pays fees. Such services include loan processing and administrative services (legal, accounting, human resources, data processing and management information, assignment processing, post-closing, underwriting, facilities management, quality control, management consulting, risk management, promotions, public relations, advertising and compliance with credit agreements). The Company also pays the joint ventures a broker fee for referrals of eligible mortgage loans.

Fees earned, costs incurred, and amounts payable to or receivable from joint ventures were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Loan processing and administrative services fee income	$	4,876	$	3,650	$	12,754	$	10,757

Loan origination broker fees expense	$	31,917	$	22,749	$	81,843	$	63,457


	September 30, 2022		December 31, 2021
Amounts (payable) receivable from joint ventures	$	(8,136)	$	1,855

The Company paid management fees to a shareholder of the Company of $0.2 million during the nine months ended September 30, 2021. The Company employed certain individuals who provided services to a shareholder whose salaries totaled $0.2 million during the nine months ended September 30, 2022 and $0.1 million and $0.3 million during three and nine months ended September 30, 2021, respectively.

NOTE 13 – EQUITY

The Continuing LLC Members have the right to exchange one Holdco Unit and one share of Class B common stock or Class C common stock, as applicable, together for cash or one share of Class A common stock at the Company’s election, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications. The Company consolidates the financial results of LD Holdings and reports noncontrolling interest related to the interests held by the Continuing LLC Members.

The noncontrolling interest of $0.6 billion and $1.1 billion as of September 30, 2022 and December 31, 2021, respectively, represented the economic interest in LD Holdings held by the Continuing LLC Members. As Continuing LLC Members convert shares, noncontrolling interest is adjusted to proportionately reduce the economic interest in LD Holdings with an offset to additional paid-in-capital on the consolidated statements of equity. The following table summarizes the ownership of LD Holdings as of September 30, 2022.


Holding Member Interests:	Holdco Units	Ownership Percentage
loanDepot, Inc.	165,002,738	52.53%
Continuing LLC Members	149,130,538	47.47%
Total	314,133,276	100.00%

NOTE 14 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share of Class A common stock and Class D common stock is computed by dividing net income (loss) attributable to loanDepot, Inc. by the weighted-average number of shares of Class A common stock and Class D common stock, respectively, outstanding during the period. Diluted earnings (loss) per share of Class A common stock and Class D common stock is computed by dividing net income (loss) attributable to loanDepot, Inc. by the weighted-average number of shares of Class A common stock and Class D common stock respectively, outstanding adjusted to give effect to potentially dilutive securities.

The basic and diluted earnings per share period for the nine months ended September 30, 2021 represents the period after February 11, 2021, wherein the Company had outstanding Class A common stock and Class D common stock. There was no Class B common stock outstanding as of September 30, 2022 and 2021. The following table sets forth the calculation of basic and diluted earnings (loss) per share for Class A common stock and Class D common stock:


	Three Months Ended						Nine Months Ended
	September 30, 2022						September 30, 2022
	Class A		Class D		Total		Class A		Class D		Total


Net loss attributable to loanDepot, Inc.	$	(24,200)	$	(35,881)	$	(60,081)	$	(70,421)	$	(125,330)	$	(195,750)





Weighted average shares - basic	65,437,698		97,026,671		162,464,369		54,611,035		97,192,893		151,803,928

Loss per share - basic	$	(0.37)	$	(0.37)	$	(0.37)	$	(1.29)	$	(1.29)	$	(1.29)

Diluted loss per share:



Net loss allocated to common stockholders - diluted	$	(24,200)	$	(35,881)	$	(60,081)	$	(70,421)	$	(125,330)	$	(195,751)





Weighted average shares - diluted	65,437,698		97,026,671		162,464,369		54,611,035		97,192,893		151,803,928

Loss per share - diluted	$	(0.37)	$	(0.37)	$	(0.37)	$	(1.29)	$	(1.29)	$	(1.29)


	Three Months Ended						Nine Months Ended
	September 30, 2021						September 30, 2021
	Class A		Class D		Total		Class A		Class D		Total


Net income attributable to loanDepot, Inc.	$	6,052	$	45,423	$	51,475	$	9,233	$	95,678	$	104,911





Weighted average shares - basic	15,318,921		114,978,644		130,297,565		11,259,896		116,681,435		127,941,331

Earnings per share - basic	$	0.40	$	0.40	$	0.40	$	0.82	$	0.82	$	0.82

Diluted income per share:



Net income allocated to common stockholders - diluted	$	6,052	$	45,423	$	51,475	$	9,233	$	95,678	$	104,911





Weighted average shares - diluted	15,318,921		114,978,644		130,297,565		11,259,896		116,681,435		127,941,331

Earnings per share - diluted	$	0.40	$	0.40	$	0.40	$	0.82	$	0.82	$	0.82

For the three and nine months ended September 30, 2022, 156,677,534 and 167,796,888 shares of Class C common stock were evaluated for the assumed exchange of noncontrolling interests and determined to be anti-dilutive, and thus were excluded from the computation of diluted loss per share.

For the three and nine months ended September 30, 2022, 14,869,764 and 12,907,024 of Class A RSUs and nonqualified stock options were determined to be anti-dilutive, and thus excluded from the computation of diluted loss per share.

For the three months ended September 30, 2021, 191,579,524 shares of Class C common stock were evaluated for the assumed exchange of noncontrolling interests and determined to be anti-dilutive, and thus were excluded from the computation of diluted earnings per share. For the period from February 11, 2021 to September 30, 2021, 195,111,599 shares of Class C common stock were evaluated for the assumed exchange of noncontrolling interests and determined to be anti-dilutive, and thus were excluded from the computation of diluted earnings per share.

For the three months ended September 30, 2021, 1,405,281 of RSUs were determined to be anti-dilutive, and thus excluded from the computation of diluted earnings per share. For the period from February 11, 2021 to September 30, 2021, 1,008,758 of RSUs were determined to be anti-dilutive, and thus excluded from the computation of diluted earnings per share.

NOTE 15– COMMITMENTS AND CONTINGENCIES

Escrow Services

In conducting its operations, the Company, through its wholly-owned subsidiaries, LDSS and ACT, routinely hold customers' assets in escrow pending completion of real estate financing transactions. These amounts are maintained in segregated bank accounts and are offset with the related liabilities resulting in no amounts reported in the accompanying consolidated balance sheets. The balances held for the Company’s customers totaled $8.0 million and $21.1 million at September 30, 2022 and December 31, 2021, respectively.

Legal Proceedings

The Company is a defendant in, or a party to, legal actions and proceedings that arise in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted against the Company. These matters include actions alleging improper lending practices, improper servicing, quiet title actions, improper foreclosure practices, violations of consumer protection laws, etc. and on account of consumer bankruptcies. In many of these actions, the Company may not be the real party of interest (because the Company is not the servicer of the loan or the holder of the note) but it may appear in the pleadings because it is in the chain of title to property over which there may be a dispute. Such matters may be indemnified and managed by the appropriate party, which may be the Company’s subservicer. In other cases, such as lien avoidance cases brought in bankruptcy, the Company is insured by title insurance, and the case is turned over to the title insurer who tenders the Company’s defense. In some of these actions and proceedings, claims for monetary damages are asserted against the Company. In view of the inherent difficulty of predicting the outcome of such legal actions and proceedings, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss related to each pending matter may be, if any.

The Company seeks to resolve all litigation and regulatory matters in the manner management believes is in the best interest of the Company and contests liability, allegations of wrongdoing, and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with outstanding legal and regulatory proceedings utilizing the latest information available. Any estimated loss is subject to significant judgment and is based upon currently available information, a variety of assumptions, and known and unknown uncertainties. Where available information indicates that it is probable a liability has been incurred and the Company can reasonably estimate the amount of the loss, an accrued liability is established. The actual costs of resolving these proceedings may be substantially higher or lower than the amounts accrued.

Employment Litigation

On December 24, 2020, the Company received a demand letter from one of the senior members of its operations team alleging, among other things, loan origination noncompliance and various employment related claims, including hostile work environment and gender discrimination, with unspecified damages. The executive has since resigned her position with the Company. The parties participated in pre-litigation mediation in May 2021. The parties did not resolve the matter at mediation and a complaint was filed with the Superior Court of the State of California, County of Orange on September 21, 2021 and an amended complaint was filed on December 21, 2021. In response, on February 2, 2022 the Company filed a demurrer to the complaint with the Superior Court of the State of California, County of Orange, for failing to state facts sufficient to constitute a cause of action while still vigorously denying the claims within the complaint. On March 24, 2022, the plaintiff filed her opposition to loanDepot’s demurrer. On March 29, 2022, the Company filed its reply to Plaintiff’s opposition. A hearing was held on the Company’s demurrer on May 12, 2022, at the Superior Court of the State of California, County of Orange. The court sustained the Company’s demurrer in full. On June 30, 2022, the Company filed its answer and affirmative defenses to the amended complaint. The plaintiff seeks damages in excess of $75 million. The Company believes this lawsuit is without merit and intends to vigorously defend against it. Discovery in this matter is still ongoing.

While the Company’s management does not believe these allegations have merit, defending such allegations could result in substantial costs and a diversion of management’s attention and resources.

The ultimate outcome of the other legal proceedings is uncertain, and the amount of any future potential loss is not considered probable or estimable. The Company will incur defense costs and other expenses in connection with these legal proceedings. If the final resolution of any legal proceedings is unfavorable, it could have a material adverse effect on the Company’s business and financial condition.

Based on the Company’s current understanding of these pending legal actions and proceedings, management does not believe that judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, will have a material adverse effect on the consolidated financial position, operating results or cash flows of the Company. However, unfavorable resolutions could affect the consolidated financial position, results of operations or cash flows for the years in which they are resolved.

Regulatory Requirements

The Company is subject to various capital requirements by the U.S. Department of Housing and Urban Development (“HUD”); lenders of the warehouse lines of credit; and secondary markets investors. Failure to maintain minimum capital requirements could result in the inability to participate in HUD-assisted mortgage insurance programs, to borrow funds from warehouse line lenders or to sell or service mortgage loans. As of September 30, 2022, the Company was in compliance with its selling and servicing capital requirements.

Commitments to Extend Credit

The Company enters into IRLCs with customers who have applied for residential mortgage loans and meet certain credit and underwriting criteria. These commitments expose the Company to market risk if interest rates change and the loan is not economically hedged or committed to an investor. The Company is also exposed to credit loss if the loan is originated and not sold to an investor and the customer does not perform. The collateral upon extension of credit typically consists of a first deed of trust in the mortgagor’s residential property. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. Total commitments to originate loans as of September 30, 2022 and December 31, 2021 approximated $4.8 billion and $12.7 billion, respectively. These loan commitments are treated as derivatives and are carried at fair value, refer to Note 6- Derivative Financial Instruments and Hedging Activities for further information on derivatives.

Loan Loss Obligation for Sold Loans

When the Company sells mortgage loans, it makes customary representations and warranties to the purchasers about various characteristics of each loan such as the origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. The Company establishes a loan repurchase reserve for losses associated with repurchase loan obligations if the Company breached a representation or warranty given to the loan purchaser. Additionally, the Company’s loan loss obligation for sold loans includes an estimate for losses associated with early payoffs and early payment defaults. There have been charge-offs associated with early payoffs, early payment defaults and losses related to representations, warranties, and other provisions for the three and nine months ended September 30, 2022 and 2021.

The activity related to the loan loss obligation for sold loans is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Balance at beginning of period	$	85,873	$	26,626	$	29,877	$	33,591
Provision for loan loss obligations	12,932		2,456		108,550		2,723
Charge-offs	(29,879)		(2,094)		(69,501)		(9,326)
Balance at end of period	$	68,926	$	26,988	$	68,926	$	26,988

Obligation for Sold MSRs

The Company recognizes sales of mortgage servicing rights as sales if title passes, if substantially all risks and rewards of ownership have irrevocably passed to the purchaser, and any protection provisions retained by the Company are minor and can be reasonably estimated. If a sale is recognized and only minor protection provisions exist, a liability for the estimated obligation associated with those provisions is recorded in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet. The Company establishes a reserve related to the reimbursement of the purchase price for any loans that are prepaid in full within 90 days of the MSR sale transaction. The obligation for sold MSRs was $6.5 million and $0.4 million as of September 30, 2022 and December 31, 2021, respectively

TRA Liability

As part of the IPO and reorganization, the Company entered into a TRA with Parthenon Stockholders and certain Continuing LLC Members, whereby loanDepot, Inc. will be obligated to pay such parties or their permitted assignees, 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local taxes that loanDepot, Inc. realizes, or is deemed to realize as a result of future tax benefits from increases in tax basis. The TRA liability is accounted for as a contingent liability with amounts accrued when deemed probable and estimable. The Company recognized a TRA liability of $47.8 million and $32.9 million as of September 30, 2022 and December 31, 2021, respectively, which represents the Company’s estimate of the aggregate amount that it will pay under the TRA as a result of the offering transaction. The amounts payable under the TRA will vary depending on a number of factors, such as the amount and timing of taxable income attributable to loanDepot, Inc.

NOTE 16 – REGULATORY CAPITAL AND LIQUIDITY REQUIREMENTS

The Company, through certain subsidiaries, is required to maintain minimum net worth, liquidity and other financial requirements specified in certain of its selling and servicing agreements, including:

•Ginnie Mae single-family issuers. The eligibility requirements include net worth of $2.5 million plus 0.35% of outstanding Ginnie Mae single-family obligations and a liquidity requirement equal to the greater of $1.0 million or 0.10% of outstanding Ginnie Mae single-family securities.

•Fannie Mae and Freddie Mac. The eligibility requirements for seller/servicers include tangible net worth of $2.5 million plus 0.25% of the Company’s total single-family servicing portfolio, excluding loans subserviced for others

and a liquidity requirement equal to 0.035% of the aggregate UPB serviced for the agencies plus 2.0% of total nonperforming agency servicing UPB in excess of 6%.

•HUD. The eligibility requirements include a minimum adjusted net worth of $1.0 million plus 1% of the total volume in excess of $25.0 million of FHA Single Family Mortgages originated, underwritten, serviced, and/or purchased during the prior fiscal year, up to a maximum required adjusted net worth of $2.5 million.

•Fannie Mae, Freddie Mac and Ginnie Mae. The Company is also required to hold a ratio of Adjusted/Tangible Net Worth to Total Assets greater than 6%.

To the extent that these requirements are not met, the Company may be subject to a variety of regulatory actions which could have a material adverse impact on our results of operations and financial condition. The most restrictive of the minimum net worth and capital requirements require the Company to maintain a minimum adjusted net worth balance of $125.3 million as of September 30, 2022. The Company was in compliance with the net worth, liquidity and other financial requirements of its selling and servicing requirements as of September 30, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an analysis of the Company's financial condition, cash flows and results of operations from management's perspective and should be read in conjunction with our consolidated financial statements and the accompanying notes included under Part I. Item 1 of this report. The results of operations described below are not necessarily indicative of the results to be expected for any future periods. This discussion includes forward-looking information that involves risks and assumptions which could cause actual results to differ materially from management’s expectations. See our cautionary language at the beginning of this report under “Special Note Regarding Forward-Looking Statements” and for a more complete discussion of the factors that could affect our future results refer to Part II. “Item 1A. Risk Factors” and elsewhere in this Form 10-Q and Part I, Item 1A "Risk Factors" in our 2021 Form 10-K. Capitalized terms used but not otherwise defined herein have the meanings set forth in the our Form 10-K.

Overview

loanDepot is a customer-centric and technology-enabled residential mortgage platform. We launched our business in 2010 to provide mortgage loan solutions to consumers who were dissatisfied with the services offered by banks and other traditional market participants. Since our inception, we have significantly expanded our origination platform both in terms of size and capabilities. Our primary sources of revenue are derived from the origination of conventional and government mortgage loans, servicing conventional and government mortgage loans, and providing a growing suite of ancillary services.

The Company's common stock began trading on the New York Stock Exchange on February 11, 2021 under the ticker symbol "LDI." The initial public offering consisted of 3,850,000 shares of Class A common stock, $0.001 par value per share, at an offering price of $14.00 per share, pursuant to a Registration Statement on Form S-1.

A summary of our critical accounting policies and estimates is included in Critical Accounting Policies and Estimates.

Key Factors Influencing Our Results of Operations

Market and Economic Environment

The consumer lending market and the associated loan origination volumes for mortgage loans are influenced by interest rates and economic conditions. While borrower demand for consumer credit has typically remained strong in most economic environments, general market conditions, including the interest rate environment, unemployment rates, home price appreciation and consumer confidence may affect borrower willingness to seek financing and investor desire and ability to invest in loans. For example, a significant interest rate increase or rise in unemployment could cause potential borrowers to defer seeking financing as they wait for interest rates to stabilize or the general economic environment to improve. Additionally, if the economy weakens and actual or expected default rates increase, loan investors may postpone or reduce their investments in loan products.

The volume of mortgage loan originations associated with home purchases is generally affected by broader economic factors as well as the overall strength of the economy, housing prices, and interest rate fluctuations. Increases in interest rates may affect affordability and the ability for potential home buyers to qualify for a mortgage loan. Purchase mortgage loan origination volume can be subject to seasonal trends as home sales typically rise during the spring and summer seasons and decline in the fall and winter seasons. This is somewhat offset by purchase loan originations sourced from our joint ventures which experience their highest level of activity during November and December as home builders focus on completing and selling homes prior to year-end. Seasonality has less of an impact on mortgage loan refinancing volumes, which are primarily driven by fluctuations in mortgage loan interest rates.

Fluctuations in Interest Rates

Our mortgage loan refinancing volumes (and to a lesser degree, our purchase volumes), balance sheets, and results of operations are influenced by changes in interest rates and how we effectively manage the related interest rate risk. As interest rates decline, mortgage loan refinance volumes tend to increase, while an increasing interest rate environment may cause a decrease in refinance volumes and purchase volumes. In addition, the majority of our assets are subject to interest rate risk, including LHFS, IRLCs, servicing rights and mandatory trades, forward sales contracts, interest rate swap futures and put

options. We refer to such mandatory trades, forward sales contracts, interest rate swap futures and put options collectively as “Hedging Instruments.” As interest rates increase, our LHFS and IRLCs generally decrease in value while our Hedging Instruments utilized to hedge against interest rate risk typically increase in value. Rising interest rates cause our expected mortgage loan servicing revenues to increase due to a decline in mortgage loan prepayments which extends the average life of our servicing portfolio and increases the value of our servicing rights. Conversely, as interest rates decline, our LHFS and IRLCs generally increase in value while our Hedging Instruments decrease in value. In a declining interest rate environment, borrowers tend to refinance their mortgage loans, which increases prepayment speed and causes our expected mortgage loan servicing revenues to decrease, which reduces the average life of our servicing portfolio and decreases the value of our servicing rights. The changes in fair value of our servicing rights are recorded as unrealized gains and losses in changes in fair value of servicing rights, net, in our consolidated statements of operations.

As interest rates increase, rate and term refinancings become less attractive to consumers. However, rising interest rates during periods of inflationary pressures can make real assets, including real estate, an attractive investment. Demand for real estate may result in ongoing support for purchase mortgages and increasing home price appreciation creating borrower equity that may result in increasing opportunities for cash-out refinancings or home equity loans.

Current Market Conditions

In November 2022 the Federal Reserve raised the Federal Funds rate by another 0.75 percentage points for a total increase of 3.75 percentage points since the beginning of 2022. The resulting increase in mortgage interest rates have impacted mortgage transaction volumes which are expected to continue to decline through 2023. According to MBA’s Mortgage Finance Forecast published October 23, 2022, annual one-to-four family residential mortgage origination volumes are expected to decrease by $0.2 trillion, or 9% to $2.0 trillion by December 31, 2023. The primary driver of this decrease is refinance volume.

As a result of current market conditions, we have implemented our Vision 2025 Plan, the plan’s four primary elements include: 1) Increase focus on purchase transactions while serving increasingly diverse communities across the country; 2) Execute previously announced growth-generating initiatives; 3) Centralize management of loan originations and loan fulfillment to enhance quality and effectiveness; and 4) Right-size our cost structure. During the third quarter of 2022, we reduced our real estate footprint which resulted in a $9.1 million lease impairment and $11.0 million loss on disposal of fixed assets. We reduced our quarterly operating expenses including personnel and marketing related costs and completed the exit of our wholesale business. We have substantially completed the transition of our servicing portfolio to our in-house platform, and we recently began the initial launch of our digital HELOC solution. In partnership with National HomeCorp., a Georgia-based homebuilder specializing in affordable single-family homes, we formed NHC Mortgage, a new joint venture partnership advancing our goal of purpose-driven lending and providing credit to underserved communities.

Key Performance Indicators

We manage and assess the performance of our business by evaluating a variety of metrics. Selected key performance metrics include loan originations and sales and servicing metrics.

Loan Origination and Sales

Loan originations and sales by volume and units are a measure of how successful we are at growing sales of mortgage loan products and a metric used by management in an attempt to isolate how effectively we are performing. We believe that originations and sales are an indicator of our market penetration in mortgage loans and that this provides useful information because it allows investors to better assess the strength of our core business. Loan originations and sales include brokered loan originations not funded by us. We enter into IRLCs to originate loans, at specified interest rates, with customers who have applied for a mortgage and meet certain credit and underwriting criteria. We believe the volume of our IRLCs is another measure of our overall market share.

Gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by loan origination volume during period.

Pull through weighted gain on sale margin represents the total of (i) gain on origination and sale of loans, net, and (ii) origination income, net, divided by the pull through weighted rate lock volume. Pull through weighted rate lock volume is the unpaid principal balance of loans subject to interest rate lock commitments, net of a pull-through factor for the loan funding probability.

Servicing Metrics

Servicing metrics include the unpaid principal balance of our servicing portfolio and servicing portfolio units, which represent the number of mortgage loan customers we service. We believe that the net additions to our portfolio and number of units are indicators of the growth of our mortgage loans serviced and our servicing income, but may be offset by sales of servicing rights.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Financial statement data
Total revenue	$	274,192	$	923,756	$	1,086,141	$	3,019,678
Total expenses	435,125		744,771		1,602,038		2,364,054
Net (loss) income	(137,482)		154,277		(452,623)		608,414

(Loss) earnings per share of Class A and Class D common stock:
Basic	$	(0.37)	$	0.40	$	(1.29)	$	0.82
Diluted	$	(0.37)	$	0.40	$	(1.29)	$	0.82

Non-GAAP financial measures(1)
Adjusted total revenue	$	249,663	$	948,770	$	1,027,540	$	3,015,540
Adjusted net (loss) income	(116,846)		147,533		(367,101)		524,564
Adjusted (LBITDA) EBITDA	(114,133)		238,261		(380,049)		805,622
Adjusted diluted (loss) earnings per share	N/A		N/A		N/A		N/A

Loan origination and sales
Loan originations by channel:
Retail	$	6,331,564	$	24,938,035	$	33,688,829	$	86,247,597
Partner	3,518,363		7,047,770		13,706,884		21,711,525
Total	$	9,849,927	$	31,985,805	$	47,395,713	$	107,959,122

Loan originations by purpose:
Purchase	$	6,938,408	$	11,008,399	$	24,469,338	$	29,307,875
Refinance	2,911,519		20,977,406		22,926,375		78,651,247
Total	$	9,849,927	$	31,985,805	$	47,395,713	$	107,959,122
Loan originations (units)	29,795		94,799		142,057		306,352

Licensed loan officers:
Retail	2,096		3,081		2,096		3,081
Partner	223		280		223		280
Total	2,319		3,361		2,319		3,361

Loans sold:
Servicing retained	$	6,604,979	$	26,520,547	$	34,296,344	$	94,937,638
Servicing released	5,132,350		5,672,551		18,220,561		11,474,587
Total	$	11,737,329	$	32,193,098	$	52,516,905	$	106,412,225
Loans sold (units)	34,613		95,735		154,624		302,764


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2022			2021			2022			2021
Gain on sale margin	1.80		%	2.84		%	1.66		%	2.71		%
Gain on sale margin - retail	2.34			3.28			1.87			3.02
Gain on sale margin - partner	0.84			1.24			1.15			1.49



Pull through weighted gain on sale margin	2.03			2.99			1.92			3.13

IRLCs	$	12,032,026		$	43,673,515		$	61,620,241		$	131,502,157
IRLCs (units)	38,569			134,756			188,444			397,201

Pull through weighted lock volume	$	8,755,082		$	30,354,123		$	40,968,021		$	93,603,559

Servicing metrics
Total servicing portfolio (unpaid principal balance)	$	139,709,633		$	145,305,182		$	139,709,633		$	145,305,182
Total servicing portfolio (units)	463,471			469,019			463,471			469,019
60+ days delinquent ($)	$	1,365,774		$	1,679,691		$	1,365,774		$	1,679,691
60+ days delinquent (%)	0.98		%	1.16		%	0.98		%	1.16		%
Servicing rights at fair value, net(2)	$	2,013,269		$	1,836,694		$	2,013,269		$	1,836,694
Weighted average servicing fee (3)	0.29		%	0.30		%	0.29		%	0.30		%
Multiple(3) (4)	5.2			4.5			5.2			4.5

(1)Refer to the section titled “Non-GAAP Financial Measures” for a discussion and reconciliation of our Non-GAAP financial measures.

(2)Amount represents the fair value of servicing rights, net of servicing liabilities, which are included in accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets.

(3)Agency only.

(4)Amounts represent the fair value of servicing rights, net, divided by the weighted average annualized servicing fee.

Results of Operations

The following table sets forth our consolidated financial statement data for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.


	Three Months Ended September 30,				Change $	Change %
(Dollars in thousands)	2022		2021
	(Unaudited)



REVENUES:


Net interest income	$	9,794	$	14,235			$	(4,441)	(31.2)	%
Gain on origination and sale of loans, net	156,300		821,275				(664,975)		(81.0)
Origination income, net	21,268		86,601				(65,333)		(75.4)
Servicing fee income	113,544		102,429				11,115		10.9
Change in fair value of servicing rights, net	(38,479)		(138,462)				99,983		72.2
Other income	11,765		37,678				(25,913)		(68.8)
Total net revenues	274,192		923,756				(649,564)		(70.3)


EXPENSES:
Personnel expense	218,819		449,152				(230,333)		(51.3)
Marketing and advertising expense	42,940		131,971				(89,031)		(67.5)
Direct origination expense	19,463		49,559				(30,096)		(60.7)
General and administrative expense	83,412		50,013				33,399		66.8
Occupancy expense	9,889		9,686				203		2.1
Depreciation and amortization	10,243		8,688				1,555		17.9
Servicing expense	14,221		22,879				(8,658)		(37.8)
Other interest expense	36,138		22,823				13,315		58.3
Goodwill impairment	—		—				—		NM
Total expenses	435,125		744,771				(309,646)		(41.6)

(Loss) income before income taxes	(160,933)		178,985				(339,918)		(189.9)

Income tax (benefit) expense	(23,451)		24,708				(48,159)		(194.9)

Net (loss) income	(137,482)		154,277				(291,759)		(189.1)

Net (loss) income attributable to noncontrolling interests	(77,401)		102,802				(180,203)		(175.3)

Net (loss) income attributable to loanDepot, Inc.	$	(60,081)	$	51,475			$	(111,556)	(216.7)

The results for the three months ended September 30, 2022 reflect an increase in mortgage rates which resulted in a decrease in our profit margins. The decrease of $291.8 million, or 189.1% in net income reflect a $665.0 million decrease in gain on origination and sale of loans, net, partially offset by a $309.6 million decrease in total expenses. The increased interest rate environment resulted in a decrease in margins and volume of mortgage loan originations and IRLCs from the comparable 2021 period.

Revenues

Net Interest Income. Net interest income represents income earned on LHFS offset by interest expense on amounts borrowed under warehouse and other lines of credit to finance such loans until sold. A $5.5 billion decrease in the average balance of LHFS coupled with higher costing warehouse lines drove the decrease in net interest income.

Gain on Origination and Sale of Loans, Net. Gain on origination and sale of loans, net, was comprised of the following components:



	Three Months Ended September 30,				Change $		Change %
(Dollars in thousands)	2022		2021
(Discount) premium from loan sales	$	(83,312)	$	674,782	$	(758,094)	(112.3)	%
Servicing rights additions	124,244		345,882		(221,638)		(64.1)
Fair value losses on IRLC and LHFS	(203,519)		(107,689)		(95,830)		(89.0)
Fair value gains (losses) from Hedging Instruments	274,185		(39,659)		313,844		791.4

Discount points, rebates and lender paid costs	57,634		(49,585)		107,219		216.2

Provision for loan loss obligation for loans sold	(12,932)		(2,456)		(10,476)		(426.5)
Total gain on origination and sale of loans, net	$	156,300	$	821,275	$	(664,975)	(81.0)

The decrease in gain on origination and sale of loans, net was primarily driven by a reduction in volume and margins due to higher interest rates, partially offset by fair value gains from Hedging Instruments.

Origination Income, Net. Origination income, net, reflects the fees that we earn, net of lender credits we pay, from originating loans. Origination income includes loan origination fees, processing fees, underwriting fees, and other fees collected from the borrower at the time of funding. Lender credits typically include rebates or concessions to borrowers for certain loan origination costs. The $65.3 million or 75.4% decrease in origination income was the result of a 69.2% decrease in loan origination volumes.

Servicing Fee Income. Servicing fee income reflects contractual servicing fees and ancillary and other fees (including late charges) related to the servicing of mortgage loans. The increase of $11.1 million or 10.9% in servicing income reflects an increase of $4.3 billion in the average UPB of our servicing portfolio.

Change in Fair Value of Servicing Rights, Net. Change in fair value of servicing rights, net includes (i) fair value gains or losses net of Hedging Instrument gains or losses; (ii) collection/realization of cash flows, which includes principal amortization and prepayments; and (iii) realized gains or losses on the sales of servicing rights. The increase of $100.0 million reflects fair value gains of $49.5 million and lower prepayments of $49.7 million due to the increasing rate environment.

Other Income. Other income includes our pro rata share of net earnings from joint ventures, fee income from title, escrow and settlement services for mortgage loan transactions performed by LDSS, and fair value changes in our trading securities. The decrease of $25.9 million or 68.8% was primarily the result of a decrease of $26.5 million in escrow and title fee income due to decreased mortgage loan settlement activity and fair value losses of $6.1 million on our trading securities due to the increasing rate environment.

Expenses

Personnel Expense. Personnel expense includes salaries, commissions, incentive compensation, benefits, and other employee compensation costs. The $230.3 million or 51.3% decrease reflects lower commissions of $155.8 million due to lower loan origination volumes and lower salaries and benefits of $80.7 million, partially offset by higher severance of $8.0 million related to previously announced cost savings initiatives. As of September 30, 2022, we had 6,121 employees compared to 11,664 employees as of September 30, 2021, representing a decrease of 47.5%.

Marketing and Advertising Expense. Marketing and advertising expenses relate to performance and brand marketing. The $89.0 million or 67.5% decrease in marketing expense was driven by cost savings measures affecting purchased leads, television, and print ads.

General and Administrative Expense. General and administrative expenses include professional fees, data processing expense, communications expense, and other operating expenses. The $33.4 million or 66.8% increase in general and administrative expense was driven by charges that included an $11.0 million loss on disposal of fixed assets, $9.1 million of lease impairment charges, and a $4.5 million increase in professional and consulting services.

Servicing Expense. Servicing expense reflects in-house servicing costs and amounts that we pay to our sub-servicers to service our mortgage loan servicing portfolio. The $8.7 million or 37.8% decrease in servicing expense reflects our shift to in-house servicing.

Other Interest Expense. The $13.3 million or 58.3% increase in other interest expense was the result of a $785.3 million increase in average outstanding debt obligations primarily resulting from a $907.3 million increase in MSR facilities.

Income Tax Expense (Benefit). Benefit for income taxes of $23.5 million for the three months ended September 30, 2022, compared to expense of $24.7 million for the three months ended September 30, 2021 reflects net losses for the three months ended September 30, 2022 compared to net income for the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021


	Nine Months Ended September 30,				Change $	Change %
(Dollars in thousands)	2022		2021
	(Unaudited)
REVENUES:


Net interest income	$	45,668	$	22,495			$	23,173	103.0	%
Gain on origination and sale of loans, net	665,993		2,647,328				(1,981,335)		(74.8)
Origination income, net	119,449		280,824				(161,375)		(57.5)
Servicing fee income	341,929		279,738				62,191		22.2
Change in fair value of servicing rights, net	(140,370)		(327,194)				186,824		57.1
Other income	53,472		116,487				(63,015)		(54.1)
Total net revenues	1,086,141		3,019,678				(1,933,537)		(64.0)


EXPENSES:
Personnel expense	861,382		1,523,012				(661,630)		(43.4)
Marketing and advertising expense	205,289		355,730				(150,441)		(42.3)
Direct origination expense	106,616		146,553				(39,937)		(27.3)
General and administrative expense	197,089		149,984				47,105		31.4
Occupancy expense	28,673		28,956				(283)		(1.0)
Depreciation and amortization	32,110		25,827				6,283		24.3
Servicing expense	46,472		76,731				(30,259)		(39.4)
Other interest expense	83,671		57,261				26,410		46.1
Goodwill impairment	40,736		—				40,736		100.0
Total expenses	1,602,038		2,364,054				(762,016)		(32.2)
(Loss) income before income taxes	(515,897)		655,624				(1,171,521)		(178.7)

Income tax (benefit) expense	(63,274)		47,210				(110,484)		(234.0)

Net (loss) income	(452,623)		608,414				(1,061,037)		(174.4)

Net (loss) income attributable to noncontrolling interests	(256,873)		503,503				(760,376)		(151.0)

Net (loss) income attributable to loanDepot, Inc.	$	(195,750)	$	104,911			$	(300,661)	(286.6)

Results for the nine months ended September 30, 2022 reflect the sharp increase in mortgage rates which resulted in a decrease to our profit margins. The decrease of $1.1 billion, or 174.4% in net income is primarily from a $2.0 billion decrease in gain on origination and sale of loans, net, partially offset by a $762.0 million decrease in total expenses. The increased interest rate environment resulted in a decrease in margins and volume of mortgage loan originations and IRLCs from the comparable 2021 period.

Revenues

Net Interest Income. The increase in net interest income reflected higher yields on LHFS, partially offset by a $3.3 billion decrease in average LHFS.

Gain on Origination and Sale of Loans, Net. Gain on origination and sale of loans, net was comprised of the following components:



	Nine Months Ended September 30,				Change $		Change %
(Dollars in thousands)	2022		2021
(Discount) premium from loan sales	$	(756,602)	$	1,552,668	$	(2,309,270)	(148.7)	%
Servicing rights additions	574,459		1,302,884		(728,425)		(55.9)
Fair value losses on IRLC and LHFS	(501,053)		(454,845)		(46,208)		(10.2)
Fair value gains from Hedging Instruments	1,268,271		442,387		825,884		186.7

Discount points, rebates and lender paid costs	189,468		(193,043)		382,511		198.1

Provision for loan loss obligation for loans sold	(108,550)		(2,723)		(105,827)		(3,886.4)
	$	665,993	$	2,647,328	$	(1,981,335)	(74.8)

The decrease in gain on origination and sale of loans, net reflects increased market rates during the nine months ended September 30, 2022 and the resulting decrease in loan origination volumes and gain on sale margins, partially offset by fair value gains from Hedging Instruments and lower lender paid costs. The increased provision for loan loss obligations on loan sold also reflects the higher market rates which reduced the fair value of loans subject to repurchase that were originated in prior periods at lower interest rates.

Origination Income, Net. The decrease in origination income, net, of $161.4 million or 57.5% is consistent with the decrease in loan origination volumes.

Servicing Fee Income. The $62.2 million or 22.2% increase was the result of an increase of $23.3 billion in the average UPB of our servicing portfolio.

Change in Fair Value of Servicing Rights, Net. The increase of $186.8 million reflects a $130.1 million decrease in prepayments from the increasing rate environment and $54.5 million in fair value gains.

Other Income. The decrease of $63.0 million or 54.1% reflects a decrease of $53.6 million in escrow and title fee income due to decreased mortgage loan settlement services and fair value losses on trading securities of $19.1 million from rising interest rates.

Expenses

Personnel Expense. The decrease of $661.6 million reflects a $434.2 million decrease in commissions due to the decrease in loan originations and a $177.3 million decrease in salaries and benefits due to the 47.5% decrease in headcount.

Marketing and Advertising Expense. The decrease of $150.4 million or 42.3% reflects a reduction in television ads and purchased leads.

General and Administrative Expense. The $47.1 million or 31.4% increase in general and administrative expense included $15.1 million of lease impairment charges, an $11.0 million loss on disposal of fixed assets, and a $6.8 million increase in professional and consulting services.

Servicing Expense. The decrease of $30.3 million or 39.4% between periods reflects our shift to in-house servicing.

Other Interest Expense. The $26.4 million or 46.1% increase in other interest expense was the result of a $955.8 million increase in average balances and higher rates on secured credit facilities, partially offset by a $10.5 million gain on extinguishment of debt from the repurchase of $97.5 million of the 2028 Senior Notes during the first quarter of 2022.

Income Tax Expense (Benefit). The benefit for income taxes of $63.3 million for the nine months ended September 30, 2022, as compared to expense of $47.2 million for the nine months ended September 30, 2021 reflects net losses, partially offset by non-deductible impairment of goodwill and other intangible assets for the nine months ended September 30, 2022 compared to net income for the nine months ended September 30, 2021.

Balance Sheet Highlights

September 30, 2022 Compared to December 31, 2021

The following table sets forth our consolidated balance sheets as of the dates indicated:


(Dollars in thousands)	September 30, 2022		December 31, 2021		Change $		Change %
	(Unaudited)
ASSETS
Cash and cash equivalents	$	1,143,948	$	419,571	$	724,377	172.6	%
Restricted cash	160,926		201,025		(40,099)		(19.9)
Accounts receivable, net	108,253		56,183		52,070		92.7
Loans held for sale, at fair value	2,692,820		8,136,817		(5,443,997)		(66.9)
Derivative assets, at fair value	316,647		194,665		121,982		62.7
Servicing rights, at fair value	2,030,026		2,006,712		23,314		1.2
Trading securities, at fair value	97,210		72,874		24,336		33.4
Property and equipment, net	98,944		104,262		(5,318)		(5.1)
Operating lease right-of-use assets	39,480		55,646		(16,166)		(29.1)
Prepaid expenses and other assets	115,452		140,315		(24,863)		(17.7)
Loans eligible for repurchase	554,892		363,373		191,519		52.7
Investments in joint ventures	19,938		18,553		1,385		7.5


Goodwill and intangible assets, net	—		42,317		(42,317)		(100.0)
Total assets	$	7,378,536	$	11,812,313	$	(4,433,777)	(37.5)

LIABILITIES & EQUITY
Warehouse and other lines of credit	$	2,529,436	$	7,457,199	$	(4,927,763)	(66.1)
Accounts payable, accrued expenses and other liabilities	716,048		624,444		91,604		14.7
Derivative liabilities, at fair value	149,837		37,797		112,040		296.4
Liability for loans eligible for repurchase	554,892		363,373		191,519		52.7
Operating lease liability	66,122		71,932		(5,810)		(8.1)
Debt obligations, net	2,283,704		1,628,208		655,496		40.3
Total liabilities	6,300,039		10,182,953		(3,882,914)		(38.1)
Total equity	1,078,497		1,629,360		(550,863)		(33.8)
Total liabilities and equity	$	7,378,536	$	11,812,313	$	(4,433,777)	(37.5)

Cash and Cash Equivalents. The $724.4 million or 172.6% increase in cash and cash equivalents included $689.9 million in proceeds from the bulk sale of MSRs and increased utilization of MSR facilities, partially offset by the repurchase of $97.5 million of 2028 Senior Notes and $118.9 million of dividends and distributions.

Loans Held for Sale, at Fair Value. Loans held for sale, at fair value, are primarily fixed and variable rate, 15- to 30-year term first-lien loans that are secured by residential property. The $5.4 billion or 66.9% decrease reflects $52.5 billion in loan sales, partially offset by $47.4 billion in loan originations.

Derivative Assets, at Fair Value. The $122.0 million or 62.7% increase reflects a $285.5 million increase in Hedging Instruments from increasing interest rates, partially offset by a $163.5 million decrease in IRLCs assets from lower IRLC volume. At September 30, 2022, derivative assets included Hedging Instruments with fair values totaling $295.7 million compared to $10.3 million at December 31, 2021.

Servicing Rights, at Fair Value. The $23.3 million or 1.2% increase included $574.5 million in capitalized servicing rights from the sale of loans on a servicing-retained basis and a $373.2 million increase in estimated fair value due to a decrease in prepayment speed assumptions from increased interest rates, partially offset by a $740.7 million decrease in servicing rights from the sale of $43.2 billion in UPB of servicing rights and $193.0 million of principal amortization and prepayments.

Trading Securities, at Fair Value. The $24.3 million or 33.4% increase represents the Mello Mortgage Capital Acceptance securitizations completed in 2022, partially offset by principal collections and fair value losses. We retained a five percent economic interest in the credit risk of the assets collateralizing the securitization pursuant to the U.S. credit risk retention rules.

Goodwill and intangible assets, net. The impact of rising interest rates on the mortgage industry and the Company’s recent stock performance triggered an interim evaluation of goodwill and other intangible assets. Based upon the results of these evaluations, a non-cash impairment charge of $42.1 million was recognized during the second quarter of 2022 to write off the balance of goodwill and other intangible assets. The impairment charge was driven predominantly by stock market valuations and the price of our common stock, which adversely impacted the valuation of our goodwill and other intangible assets.

Warehouse and Other Lines of Credit. The decrease of $4.9 billion or 66.1% was the result of loan sales outpacing originations by $5.1 billion during the nine months ended September 30, 2022.

Derivative Liabilities, at Fair Value. The increase of $112.0 million or 296.4% reflects an $81.9 million increase in IRLCs and a $30.2 million increase in Hedging Instrument liabilities due to increasing interest rates.

Debt Obligations, net. The increase of $655.5 million or 40.3% included an increase in secured credit facilities of $748.8 million, partially offset by the repurchase of $97.5 million of our 2028 Senior Notes.

Equity. Total equity was $1.1 billion and $1.6 billion as of September 30, 2022 and December 31, 2021, respectively. The decrease was attributed to net loss of $452.6 million, dividends and distributions totaling $89.8 million, decrease to additional paid in capital of $19.8 million related to deferred taxes, and the repurchase of treasury shares, at cost of $0.4 million to net settle and withhold tax on vested RSUs, partially offset by stock-based compensation of $11.8 million.

Liquidity and Capital Resources

Liquidity

Our liquidity reflects our ability to meet our current obligations (including our operating expenses and, when applicable, the retirement of our debt and margin calls relating to our Hedging Instruments, warehouse and other lines of credit, and secured credit facilities, fund new originations and purchases, meet servicing requirements, and make investments as we identify them. We forecast the need to have adequate liquid funds available to operate and grow our business. As of September 30, 2022, unrestricted cash and cash equivalents were $1.1 billion and committed and uncommitted available capacity under our warehouse and other lines of credit was $3.1 billion.

We fund substantially all of the mortgage loans we close through borrowings under our warehouse and other lines of credit. Our mortgage origination liquidity could be affected as our lenders reassess their exposure to the mortgage origination industry and either curtail access to uncommitted mortgage warehouse financing capacity or impose higher costs to access such capacity. Our liquidity may be further constrained as there may be less demand by investors to acquire our mortgage loans in the secondary market.

As a servicer, we are required to advance principal and interest to the investor for up to four months on GSE backed mortgages and longer on other government agency backed mortgages on behalf of clients who have entered a forbearance plan. As of September 30, 2022, approximately 0.2%, or $319.5 million UPB, of our servicing portfolio was in active forbearance. While these advance requirements have decreased from the higher levels during 2020, the economic impact of COVID-19 could continue to result in additional advance requirements related to forbearance plans.

Sources and Uses of Cash

Our primary sources of liquidity have been as follows: (i) funds obtained from our warehouse and other lines of credit; (ii) proceeds from debt obligations; (iii) proceeds received from the sale and securitization of loans; (iv) proceeds from the sale of servicing rights; (v) loan fees from the origination of loans; (vi) servicing fees; (vii) title and escrow fees from settlement services; (viii) real estate referral fees; and (ix) interest income from LHFS.

Our primary uses of funds for liquidity have included the following: (i) funding mortgage loans; (ii) funding loan origination costs; (iii) payment of warehouse line haircuts required at loan origination; (iv) payment of interest expense on warehouse and other lines of credit; (v) payment of interest expense under debt obligations; (vi) payment of operating expenses; (vii) repayment of warehouse and other lines of credit; (viii) repayment of debt obligations; (ix) funding of servicing advances; (x) margin calls on warehouse and other lines of credit or Hedging Instruments; (xi) payment of tax distributions to holders of Holdco Units; (xii) payments of cash dividends or distributions subject to the discretion of our board of directors, (xiii) repurchases of loans under representation and warranty breaches; and (xiv) costs relating to servicing and subservicing.

We rely on the secondary mortgage market as a source of long-term capital to support our mortgage lending operations. Approximately 78% of the mortgage loans that we originated during the nine months ended September 30, 2022 were sold in the secondary mortgage market to Fannie Mae or Freddie Mac or, in the case of MBS guaranteed by Ginnie Mae, are mortgage loans insured or guaranteed by the FHA or VA. We also sell loans to many private investors.

At this time, we currently believe that our cash on hand, as well as the sources of liquidity described above, will be sufficient to maintain our current operations and fund our loan operations and capital commitments for the next twelve months. However, we will continue to review our liquidity needs in light of current and anticipated mortgage market conditions and we have taken various steps to align our cost structure with current and expected mortgage origination volumes.

Warehouse and Other Lines of Credit and Debt Obligations

Warehouse and other lines of credit are discussed in Note 9- Warehouse and Other Lines of Credit and debt obligations are discussed in Note 10- Debt Obligations of the Notes to Consolidated Financial Statements contained in Item 1.

Our lenders require us to comply with various financial covenants including tangible net worth, liquidity, leverage ratios and profitability. As a result of net losses during 2022, we were required to amend certain of our warehouse lines or debt obligations or obtain waivers of profitability related to financial covenants in certain of our debt obligations. We expect that we will need to further amend or obtain waivers in order to maintain compliance with such financial covenants. Our lenders are not required to grant any such amendments or waivers and may determine not to do so. As of September 30, 2022, following certain amendments, we were in full compliance with all financial covenants. Although these financial covenants limit the amount of indebtedness that we may incur and affect our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to operate our business and obtain the financing necessary to achieve that purpose.

We finance most of our loan originations on a short-term basis using our warehouse and other lines of credit. Under these facilities, we agree to transfer certain loans to our counterparties against the transfer of funds by them, with a simultaneous agreement by the counterparties to transfer the loans back to us at the date loans are sold, or on demand by us, against the transfer of funds from us. We do not recognize these transfers as sales for accounting purposes. During the nine months ended September 30, 2022, loans remained on warehouse lines for an average of 18 days. Our warehouse facilities are generally short-term borrowings with original maturities between one and two years. Our securitization facilities are generally two or three year terms. We utilize both committed and uncommitted loan funding facilities and we evaluate our needs under these facilities based on forecasted volume of loan originations and sales.

As of September 30, 2022, we maintained revolving lines of credit with ten counterparties providing warehouse and securitization facilities with borrowing capacity totaling $5.7 billion of which $1.4 billion was committed. Our $5.7 billion of capacity as of September 30, 2022 was comprised of $2.9 billion with maturities staggered throughout 2022, $2.3 billion maturing in 2023, and $0.5 billion maturing in 2024. As of September 30, 2022, we had $2.5 billion of borrowings outstanding and $3.1 billion of additional availability under our facilities.

When we draw on our warehouse and securitization facilities we must pledge eligible loan collateral. Our warehouse line providers require us to make a capital investment, or “haircut.” upon financing the loan, which is generally based on product

types and the market value of the loans. The haircuts are normally recovered from sales proceeds. As of September 30, 2022, we had a total of $38.5 million in restricted cash posted as collateral with our warehouse and securitization facilities, of which $5.5 million was the minimum requirement.

In addition to our warehouse lines, we fund our balance sheet through our secured and unsecured debt obligations. The availability and cost of funds to us can vary depending on market conditions. From time to time, and subject to any applicable laws or regulations, we may take steps to reduce or repurchase our debt through redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately-negotiated transactions. The amount of debt, if any, that may be reduced or repurchased will depend on various factors, such as market conditions, trading levels of our debt, our cash positions, our compliance with debt covenants, and other considerations.

Secured debt obligations as of September 30, 2022 included secured credit facilities and Term Notes that totaled $1.3 billion net of $1.9 million of deferred financing costs. Secured credit facilities are secured by Ginnie Mae, Fannie Mae, or Freddie Mac MSRs, certain servicing advance receivables, or trading securities. Term Notes are secured by certain participation certificates relating to Ginnie Mae MSRs.

Unsecured debt obligations as of September 30, 2022 consisted of Senior Notes totaling $1.0 billion net of $11.3 million of deferred financing costs. During the first quarter of 2022, we repurchased $97.5 million of 2028 Senior Notes at an average purchase price of 87.9% of par which resulted in a $10.5 million gain on extinguishment of debt recorded in other interest expense on the consolidated statement of operations.

Dividends and Distributions

During the nine months ended September 30, 2022, we paid dividends and distributions totaling $118.9 million.

On December 13, 2021, we declared a regular cash dividend of $0.08 per share on our Class A common stock and Class D common stock. The board of directors of LD Holdings authorized a simultaneous cash distribution on its units. The dividend was paid on January 18, 2022 to the Company's stockholders of record as of the close of business on January 3, 2022.

On March 14, 2022, we declared a regular cash dividend of $0.08 per share on our Class A common stock and Class D common stock. The board of directors of LD Holdings authorized a simultaneous cash distribution on its units. The dividend was paid on April 18, 2022 to the Company's stockholders of record as of the close of business on April 4, 2022.

Cash dividends are subject to the discretion of our board of directors and our compliance with applicable law, and depend on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, including the satisfaction of our obligations under the TRA, restrictions in our debt agreements, business prospects and other factors that our board of directors may deem relevant.

Our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction of organization or agreements of our subsidiaries, including agreements governing our indebtedness. Future agreements may also limit our ability to pay dividends.

As part of our balance sheet and capital management strategies, we suspended our regular quarterly dividend effective March 31, 2022 and for the foreseeable future.

Contractual Obligations and Commitments

Our estimated contractual obligations as of September 30, 2022 are as follows:


	Payments Due by Period
(Dollars in thousands)	Total		Less than 1 Year		1-3 years		3-5 Years		More than 5 Years



Warehouse and other lines of credit	$	2,529,436	$	2,029,436	$	500,000	$	—	$	—
Debt obligations (1)
Secured credit facilities	1,094,433		746,451		347,982		—		—
Term Notes	200,000		—		200,000		—		—
Senior Notes	1,002,475		—		—		500,000		502,475

Operating lease obligations (2)	74,348		23,112		33,122		13,448		4,666
Naming and promotional rights agreements	95,018		19,642		43,876		12,000		19,500
Total contractual obligations	$	4,995,710	$	2,818,641	$	1,124,980	$	525,448	$	526,641

(1) Amounts exclude deferred financing costs.

(2) Represents lease obligations for office space under non-cancelable operation lease agreements.

In addition to the above contractual obligations, we also have interest rate lock commitments and forward sale contracts. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon and, therefore, those commitments have been excluded from the table above. Refer to Note 6- Derivative Financial Instruments and Hedging Activities of the Notes to Consolidated Financial Statements contained in Item 1 for further discussion on derivatives.

Off-Balance Sheet Arrangements

As of September 30, 2022, we were party to mortgage loan participation purchase and sale agreements, pursuant to which we have access to uncommitted facilities that provide liquidity for recently sold MBS up to the MBS settlement date. These facilities, which we refer to as gestation facilities, are a component of our financing strategy and are off-balance sheet arrangements provided by certain warehouse lenders.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP, which requires us to make judgments, estimates and assumptions that affect: (i) the reported amounts of our assets and liabilities; (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period; and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on available information which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. Our accounting policies are described in Note 1 to the consolidated financial statements included in the Company's 2021 Form 10-K. At December 31, 2021, the most critical of these significant accounting policies were policies related to the fair value of loans held for sale, servicing rights, and derivative financial instruments. As of the date of this report, there have been no significant changes to the Company's critical accounting policies or estimates.

When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions.

Reconciliation of Non-GAAP Measures

To provide investors with information in addition to our results as determined by GAAP, we disclose certain non-GAAP measures to assist investors in evaluating our financial results. We believe these non-GAAP measures provide useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. They facilitate company-to-company operating performance comparisons by backing out potential differences caused by variations in hedging strategies, changes in valuations, capital structures (affecting interest expense on non-funding debt), taxation, the age and book depreciation of facilities (affecting relative depreciation expense), the amortization of intangibles, and other cost or benefit items which may vary for different companies for reasons unrelated to operating performance. These non-GAAP measures include our Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA). We exclude from each of these non-GAAP financial measures the change in fair value of MSRs and related hedging gains and losses as they add volatility and are not indicative of the Company’s operating performance or results of operation. We also exclude stock compensation expense, which is a non-cash expense, management fees, IPO expenses, gains or losses on extinguishment of debt and disposal of fixed assets, non-cash goodwill impairment, and other impairment charges to intangible assets and operating lease right-of-use assets as management does not consider these costs to be indicative of our performance or results of operations. Adjusted EBITDA (LBITDA) includes interest expense on funding facilities, which are recorded as a component of “net interest income (expense)”, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on our non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA (LBITDA). Adjustments for income taxes are made to reflect historical results of operations on the basis that it was taxed as a corporation under the Internal Revenue Code, and therefore subject to U.S. federal, state and local income taxes. These non-GAAP measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. Some of these limitations are:

•Adjusted EBITDA (LBITDA) does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Total Revenue, Adjusted Net Income (Loss), and Adjusted EBITDA (LBITDA) do not reflect any cash requirement for such replacements or improvements; and

•they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows.

Because of these limitations, Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) are not intended as alternatives to total revenue, net income (loss), net income (loss) attributable to the Company, or Diluted Earnings (Loss) Per Share or as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Total Revenue, Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) Per Share, and Adjusted EBITDA (LBITDA) along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for a reconciliation of these non-GAAP measures to their most comparable U.S. GAAP measures.


Reconciliation of Total Revenue to Adjusted Total Revenue (Dollars in thousands) (Unaudited):	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Total net revenue	$	274,192	$	923,756	$	1,086,141	$	3,019,678
Change in fair value of servicing rights net, of hedging gains and losses(1)	(24,529)		25,014		(58,601)		(4,138)
Adjusted total revenue	$	249,663	$	948,770	$	1,027,540	$	3,015,540

(1)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.


Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (Dollars in thousands) (Unaudited):	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022			September 30, 2021
Net (loss) income attributable to loanDepot, Inc.	$	(60,081)	$	51,475	$	(195,750)		$	104,911
Net (loss) income from the pro forma conversion of Class C common shares to Class A common shares(1)	(77,401)		102,802		(256,873)			503,503
Net (loss) income	(137,482)		154,277		(452,623)			608,414
Adjustments to the benefit (provision) for income taxes(2)	20,124		(27,171)		66,787			(133,076)
Tax-effected net (loss) income	(117,358)		127,106		(385,836)			475,338
Change in fair value of servicing rights, net of hedging gains and losses(3)	(24,529)		25,014		(58,601)			(4,138)
Change in fair value - contingent consideration	—		(77)		—			(77)
Stock-based compensation expense and management fees	4,773		2,882		11,794			65,084
IPO expenses	—		(54)		—			6,041
Gain on extinguishment of debt	—		—		(10,528)		(10,528)	—
Loss on disposal of fixed assets	11,026		—		11,026			—
Goodwill impairment	—		—		40,736			—
Other impairment	9,149		—		15,112			—
Tax effect of adjustments(4)	93		(7,338)		9,196			(17,684)
Adjusted net (loss) income	$	(116,846)	$	147,533	$	(367,101)		$	524,564

(1)Reflects net income (loss) to Class A common stock and Class D common stock from the pro forma exchange of Class C common stock.

(2)loanDepot, Inc. is subject to federal, state and local income taxes. Adjustments to income tax (benefit) reflect the effective income tax rates below, and the pro forma assumption that loanDepot, Inc. owns 100% of LD Holdings.


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Statutory U.S. federal income tax rate	21.00	%	21.00	%	21.00	%	21.00	%
State and local income taxes (net of federal benefit)	5.00		5.43		5.00		5.43
Effective income tax rate	26.00	%	26.43	%	26.00	%	26.43	%

(3)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.

(4)Amounts represent the income tax effect using the aforementioned effective income tax rates, excluding certain discrete tax items.


Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding (Dollars in thousands except per share) (Unaudited)	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net (loss) income attributable to loanDepot, Inc.	$	(60,081)	$	51,475	$	(195,750)	$	104,911
Adjusted net (loss) income	(116,846)		147,533		(367,101)		524,564

Share Data:
Diluted weighted average shares of Class A and Class D common stock outstanding	162,464,369		130,297,565		151,803,928		127,941,331
Assumed pro forma conversion of weighted average Class C shares to Class A common stock (1)	156,677,534		191,579,524		167,796,888		195,111,599
Adjusted diluted weighted average shares outstanding	319,141,903		321,877,089		319,600,816		323,052,930

Diluted (loss) earnings per share	$	(0.37)	$	0.40	$	(1.29)	$	0.82
Adjusted diluted (loss) earnings per share (2)	N/A		N/A		N/A		N/A

(1)Reflects the assumed pro forma conversion of all outstanding shares of Class C common stock to Class A common stock.

(2)Omitted adjusted diluted (loss) earnings per share measures that included the impact of the assumed exchange of shares to the extent the exchange was antidilutive.


Reconciliation of Net Income (Loss) to Adjusted EBITDA (LBITDA) (Dollars in thousands) (Unaudited):	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net (loss) income	$	(137,482)	$	154,277	$	(452,623)	$	608,414
Interest expense — non-funding debt(1)	36,138		22,823		83,671		57,261
Income tax (benefit) expense	(23,451)		24,708		(63,274)		47,210
Depreciation and amortization	10,243		8,688		32,110		25,827
Change in fair value of servicing rights, net of hedging gains and losses(2)	(24,529)		25,014		(58,601)		(4,138)
Change in fair value - contingent consideration	—		(77)		—		(77)
Stock-based compensation expense and management fees	4,773		2,882		11,794		65,084
IPO expenses	—		(54)		—		6,041
Loss on disposal of fixed assets	11,026		—		11,026		—
Goodwill impairment	—		—		40,736		—
Other impairment	9,149		—		15,112		—
Adjusted (LBITDA) EBITDA	$	(114,133)	$	238,261	$	(380,049)	$	805,622

(1)Represents other interest expense, which includes gain on extinguishment of debt and amortization of debt issuance costs, in the Company’s consolidated statement of operations.

(2)Represents the change in the fair value of servicing rights attributable to changes in assumptions, net of hedging gains and losses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to various risks which can affect our business, results and operations. The primary market risks to which we are exposed include interest rate risk, credit risk, prepayment risk and inflation risk.

We manage our interest rate risk and the price risk associated with changes in interest rates pursuant to the terms of an Interest Rate Risk Management Policy which (i) quantifies our interest rate risk exposure, (ii) lists the derivatives eligible for use as Hedging Instruments and (iii) establishes risk and liquidity tolerances.

Interest Rate Risk

Our principal market exposure is to interest rate risk as our business is subject to variability in results of operations due to fluctuations in interest rates. We anticipate that interest rates will remain our primary benchmark for market risk for the foreseeable future. Changes in interest rates affect our assets and liabilities measured at fair value, including LHFS, IRLCs, servicing rights and Hedging Instruments. In a declining interest rate environment, we would expect our results of operations to be positively impacted by higher loan origination volumes and loan margins. However, we would expect our results of operations to be negatively impacted by higher actual and projected loan prepayments related to our loan servicing portfolio and a decrease in the value of our servicing rights. As interest rates decline, our LHFS and IRLCs generally increase in value while our Hedging Instruments utilized to hedge against interest rate risk decrease in value. In a rising interest rate environment, we would expect a negative impact on the results of operations of our production activities and a positive impact on the results of operations of our servicing activities (principally through an increase in the fair value of our servicing rights). As interest rates increase, our LHFS and IRLCs generally decrease in value while our Hedging Instruments typically increase in value. The interaction between the results of operations of our various activities is a core component of our overall interest rate risk strategy.

IRLCs represent an agreement to extend credit to a potential customer, whereby the interest rate on the loan is set prior to funding. Our LHFS, which are held in inventory awaiting sale into the secondary market, and our IRLCs, are subject to changes in interest rates from the date of the commitment through the sale of the loan into the secondary market. Accordingly, we are exposed to interest rate risk and related price risk during the period from the date of the lock commitment through (i) the lock commitment cancellation or expiration date, or (ii) the date of sale into the secondary mortgage market. The average term for outstanding interest rate lock commitments at September 30, 2022 was 39 days; and our average holding period of the loan from funding to sale was 25 days for the nine months ended September 30, 2022.

We manage the interest rate risk associated with our outstanding IRLCs, LHFS and servicing rights by entering into Hedging Instruments. Management expects these Hedging Instruments will experience changes in fair value opposite to changes in fair value of the IRLCs and LHFS, thereby reducing earnings volatility. We take into account various factors and strategies in determining the portion of IRLCs, LHFS and servicing rights that we want to economically hedge. Our expectation of how many of our IRLCs will ultimately close is a key factor in determining the notional amount of Hedging Instruments used in hedging the position.

Credit Risk

We are subject to credit risk in connection with our loan sale transactions. While our contracts vary, we provide representations and warranties to purchasers and insurers of the mortgage loans sold that typically are in place for the life of the loan. In the event of a breach of these representations and warranties, we may be required to repurchase a mortgage loan or indemnify the purchaser, and any subsequent loss on the mortgage loan may be borne by us. The representations and warranties require adherence to applicable origination and underwriting guidelines (including those of Fannie Mae, Freddie Mac and Ginnie Mae), including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements and compliance with applicable federal, state and local law.

We record a provision for losses relating to such representations and warranties as part of our loan sale transactions. The level of the liability for losses from representations and warranties is difficult to estimate and requires considerable management judgment. The level of loan repurchase losses is dependent on economic factors, trends in property values, investor repurchase demand strategies and other external conditions that may change over the lives of the underlying loans. We evaluate the

adequacy of our liability for losses from representations and warranties based on our loss experience and our assessment of incurred losses relating to loans that we have previously sold and which remain outstanding at the balance sheet date. As our portfolio of loans sold subject to representations and warranties grows and as economic fundamentals change, such adjustments can be material. However, we believe that our current estimates adequately approximate the losses incurred on our sold loans subject to such representations and warranties.

Additionally, we are exposed to credit risk associated with our borrowers, counterparties, and other significant vendors. Our ability to operate profitably is dependent on both our access to capital to finance our assets and our ability to profitably originate, sell and service loans. Our ability to hold loans pending sale and/or securitization depends, in part, on the availability to us of adequate financing lines of credit at suitable interest rates and favorable advance rates. In general, we manage such risk by selecting only counterparties that we believe to be financially strong, dispersing the risk among multiple counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty and entering into netting agreements with the counterparties, as appropriate. During the nine months ended September 30, 2022 and 2021, we incurred no losses due to nonperformance by any of our counterparties.

Prepayment Risk

Prepayment risk is affected by interest rates (and their inherent risk) and borrowers’ actions relative to their underlying loans. To the extent that the actual prepayment speed on the loans underlying our servicing rights differs from what we projected when we initially recognized them and when we measured fair value as of the end of each reporting period, the carrying value of our investment in servicing rights will be affected. In general, an increase in prepayment expectations will decrease our estimates of the fair value of the servicing right, thereby reducing expected servicing income. We monitor the servicing portfolio to identify potential refinancings and the impact that would have on associated servicing rights.

Inflation Risk

Almost all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors will influence our performance more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Additionally, our financial statements are prepared in accordance with GAAP and our activities and balance sheets are measured with reference to historical cost and/or fair value without considering inflation.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of September 30, 2022, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we and certain of our subsidiaries are involved in various lawsuits in state or federal courts regarding violations of state or federal statutes, regulations or common law related to matters arising out of the ordinary course of business. For a further discussion of our material legal proceedings, see Note 15 - Commitments and Contingencies of the Notes to Consolidated Financial Statements included in “Item 1 Financial Statements.” Additionally, below we have described certain other significant legal proceedings.

Securities Class Action Litigation

Beginning in September 2021, two putative class action lawsuits were filed in the United States District Court for the Central District of California asserting claims under the U.S. securities laws against the Company, certain of its directors, and certain of its officers regarding certain disclosures made in connection with the Company’s IPO. The two actions were consolidated and the court appointed a lead plaintiff in May 2022. A consolidated amended complaint was filed in June 2022, which, in addition to challenging disclosures made in connection with the IPO, alleges that certain disclosures made after the IPO were false and/or misleading. The Company’s motion to dismiss was filed on August 24, 2022. On October 11, 2022, plaintiffs filed an opposition to the Company’s motion to dismiss. The Company’s reply is due on November 10, 2022. The plaintiffs seek unspecified monetary damages. The Company believes this lawsuit is without merit and intends to vigorously defend against it. The Company does not believe that a loss is probable or that the amount of loss is reasonably estimable in this matter at this time.

Stockholder Derivative Litigation

Beginning in October 2021, four shareholder derivative complaints were filed in the United States District Court for the Central District of California against certain of the Company’s directors and officers, alleging, among things, that these defendants breached their fiduciary duties by causing the Company to make the disclosures being challenged in the putative securities class action described above and seeking unspecified monetary damages for the Company and that the Company make certain changes to its corporate governance. These derivative actions

subsequently were consolidated into a single action (the “California Action”). The California Action is stayed pending resolution of a motion to dismiss in the putative securities class action. Beginning in March 2022, two substantially similar shareholder derivative complaints were filed in the United States District Court for the District of Delaware, and then were consolidated into a single action (the “Delaware Action”). The Delaware Action is stayed pending resolution of a motion to dismiss in the putative securities class action. The Company believes these lawsuits are without merit. The Company does not believe that a loss is probable or that the amount of loss is reasonably estimable in this matter at this time.

Item 1A. Risk Factors

Other than the risk factor set forth below, there have been no material changes in the risk factors discussed under Part I. "Item 1A. Risk Factors" of our 2021 Form 10-K filed with the SEC on March 18, 2022.

Macroeconomic headwinds, including inflation and higher interest rates, have negatively impacted our operations and financial results and may further negatively impact us. While we are implementing initiatives such as our Vision 2025 plan to better position the Company, these initiatives may not effectively mitigate the effects of deterioration in the macroeconomic environment.

Our operations and financial performance are affected by factors including macroeconomic conditions such as inflation fluctuations, interest rates, consumer confidence and demand. We generate a sizeable portion of our revenues from refinance and purchase mortgages. As interest rates have risen, refinancing volumes have decreased as fewer consumers were incentivized to refinance their mortgages. As a result, our revenues have decreased substantially and we experienced net losses for the nine months ended September 30, 2022. In addition, investors may seek to have us repurchase additional loans in the current environment, and because repurchased loans are typically resold at a discount to their repurchase price and unpaid principal balance we have experienced increased losses on repurchased loans or loans subject to repurchase originated at interest rates lower than currently prevailing rates. An increase in repurchase volumes of loans originated at lower interest rates could materially adversely affect our business, financial condition and results of operations.

As a result of our third quarter losses, we were required to amend certain of our warehouse lines and debt obligations related to profitability covenants for the quarter and we expect that we will need to execute additional amendments from certain of our lending counterparties related to our profitability covenants or other similar financial covenants in the future, including for the fourth quarter. There can be no assurance that such amendments will be received, in which case we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral, as well as triggering cross default provisions under other financing facilities which could materially adversely affect our financial condition and results of operations.

In July 2022, we announced our Vision 2025 plan designed to address current and anticipated mortgage market conditions by reducing staffing levels to approximately 6,500 by year-end 2022 and implementing business process optimization and other cost saving measures. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our operations from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings through headcount reduction, attrition, business process optimization, reduced marketing and third-party spending, and real estate consolidation, our operating results, financial condition, cash flows and competitive position may be materially adversely affected. We also cannot guarantee that we will not have to undertake additional staffing reductions or strategic reorganization activities in the future.

Furthermore, staffing reductions that occurred over the last several months could create an additional risk of claims being made on behalf of affected employees. Any alleged violation of applicable wage laws or other labor-or employment-related laws could result in complaints by current or former employees, adverse media coverage, investigations and damages or penalties which could have a materially adverse effect on our reputation, business, operating results and prospects. In addition, responding to any such proceeding may result in a significant diversion of management’s attention and resources, significant defense costs and other professional fees.

Finally, we may be exposed to unanticipated consequences of our staffing reductions, including attrition beyond the planned reductions, increased difficulties in our day-to-day operations, including as a result of a loss of continuity, loss of accumulated knowledge and/or efficiency, reduced employee morale and reduced ability to attract and retain qualified personnel. Employees who were not affected by our planned staffing reductions may seek alternate employment, which may force us to rely on third-party contract support creating unplanned additional expense or harm our productivity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Shares of the Company's Class B common stock or Class C common stock may each be converted, together with a corresponding Holding Unit, as applicable, at any time and from time to time at the option of the holder of such share of Class B common stock or Class C common stock, as applicable, for one fully paid and non-assessable share of Class A common stock. Each share of the Company’s Class D common stock may be converted into one fully paid and non-assessable share of Class A common stock at any time at the option of the holder of such share of Class D common stock. There is no cash or other consideration paid by the holder converting such shares and, accordingly, there is no cash or other consideration received by the Company. The shares of Class A common stock issued by the Company in such conversions are exempt from registration pursuant to Section 3(a)(9) of the Securities Act.

On July 1, 2022, we issued to stockholders 455,797 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holding Units held by such stockholders.

On August 1, 2022, we issued to stockholders 97,344 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holding Units held by such stockholders.

On September 1, 2022, we issued to stockholders 3,520,288 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holding Units held by such stockholders.

On October 1, 2022, we issued to stockholders 2,420,231 shares of Class A common stock upon the conversion of the same number of shares of our Class C common stock and corresponding Holding Units held by such stockholders.

In July 2022, 56,872 shares were purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan.

In August 2022, 23,146 shares were purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following documents are filed as a part of this report:


Exhibit No.			Description
3.1			Amended and Restated Certificate of Incorporation of loanDepot, Inc., dated February 11, 2021(incorporated herein by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 16, 2021).
3.2			Amended and Restated Bylaws of loanDepot, Inc., dated February 11, 2021 (incorporated herein by reference to exhibit 3.2 to the Company’s Current Report on Form 8-K filed on February 16, 2021).
10.1			loanDepot 2021 Omnibus Incentive Plan (as amended by the First Amendment)
10.2			loanDepot 2022 Inducement Plan (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed April 26, 2022).
10.3			Form of Restricted Stock Unit Agreement to loanDepot 2022 Inducement Plan
10.4			Form of Performance Stock Unit Agreement to loanDepot 2022 Inducement Plan
10.5			Form of Option Agreement to loanDepot 2022 Inducement Plan
10.6			loanDepot, Inc. 2022 Employee Stock Purchase Plan incorporated herein by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 on May 20, 2022).
10.7			Amendment No. 2, dated July 26, 2022, by and between Bank of America, N.A. and loanDepot.com, LLC to the Second Amended and Restated Mortgage Loan Purchase Agreement, dated as of February 2, 2022
10.8			Amendment No. 4, dated July 26, 2022, by and among Bank of America, N.A., loanDepot BA Warehouse, LLC and loanDepot.com, LLC to the Second Amended and Restated Master Repurchase Agreement, dated as of August 20, 2021.
10.9			Amendment No. 2, dated as of July 28, 2022, by and between UBS AG, by and through its branch office at 1285 Avenue of Americas and loanDepot.com, LLC to the Amended and Restated Master Repurchase Agreement.
10.10			Amendment No. 2 to the Second Amended and Restated Master Repurchase Agreement dated as of August 31, 2022, by and among loanDepot.com, LLC, as seller, Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, and Credit Suisse AG, Cayman Islands Branch, as buyer.
10.11			First Amended and Restated Master Repurchase Agreement, dated September 30, 2022, by and between loanDepot.com, LLC and JPMorgan Chase Bank, N. A.
10.12			Amendment No. 10 to the Mortgage Loan Participation Sale Agreement, dated October 10, 2022, by and between loanDepot.com, LLC and JPMorgan Chase Bank, N. A.
10.13*			Amendment No. 3, dated September 26, 2022, by and between Bank of America, N.A. and loanDepot.com, LLC to the Second Amended and Restated Mortgage Loan Purchase Agreement, dated as of February 2, 2022
10.14*+			Third Amendment dated August 12, 2022, to Amended and Restated Master Purchase Agreement, dated as of November 15, 2021, by and among TIAA, FSB, formerly known as EverBank, as administrative agent for the Buyers and as a buyer, Signature Bank, as a buyer, and loanDepot.com, LLC, as the seller
10.15*			Amendment No. 5, dated September 26, 2022, by and between Bank of America, N.A. and loanDepot.com, LLC to the Second Amended and Restated Master Repurchase Agreem ent , dated as of February 2, 2022
10.16*+			Amendment Number 3 dated September 19, 2022, to Master Repurchase Agreement and Securities Contract between Bank of Montreal and loanDepot.com, LLC
10.17*+			Fourth Amendment dated September 28, 2022, to Amended and Restated Master Purchase Agreement, dated as of November 15, 2021, by and among TIAA, FSB, formerly known as EverBank, as administrative agent for the Buyers and as a buyer, Signature Bank, as a buyer, and loanDepot.com, LLC, as the seller
10.18			Third Amended and Restated Master Purchase Agreement dated October 28, 2022, by and between Jefferies Funding LLC, as buyer, and loanDepot.com, LLC, as seller


Exhibit No.			Description
10.19*+			Amendment No. 10, dated October 31, 2022, by and among Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Island Branch, Alpine Securitization LTD., and loanDepot.com, LLC to the Master Repurchase Agreement, dated as of March 10, 2017.
10.20*+			Amendment No. 4 dated November 7, 2022, to Master Repurchase Agreement and Securities Contract between Bank of Montreal and loanDepot.com, LLC
10.21*+			Fifth Amendment dated November 8, 2022, to Amended and Restated Master Purchase Agreement, dated as of November 15, 2021, by and among TIAA, FSB, formerly known as EverBank, as administrative agent for the Buyers and as a buyer, Signature Bank, as a buyer, and loanDepot.com, LLC, as the seller
31.1*			Certification of Principal Executive Officer.
31.2*			Certification of Principal Financial Officer.
32.1*			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.0			XBRL Document
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104.0			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

+ Confidential information has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed pursuant to Item 601(b)(10) of Regulation S-K. Certain schedules, exhibits and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K or constitutes a clearly unwarranted invasion of personal privacy pursuant to Item 601(a)(6) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the staff of the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	LOANDEPOT, INC.


Dated: November 9, 2022	By:	/s/ Frank Martell
	Name:	Frank Martell
	Title:	President and Chief Executive Officer

Dated: November 9, 2022	By:	/s/ Patrick Flanagan
	Name:	Patrick Flanagan
	Title:	Chief Financial Officer