Frank Martell
Frank? Thank you, Gerhard. I appreciate everybody taking the time to join us on this call today. 2024 was a year of significant progress for Loan Depot, particularly with the completion of our Vision 2025 strategic program. Vision 2025 was born from the fires of one of the most significant contractions in the housing and mortgage markets in recent memory.
As you may recall, total market originations fell nearly 50% from 2021 to 2022, led by refinanced volumes falling almost 75%. The mortgage market continued to remain depressed in 2023 and 2024 with volumes approaching generational lows.
The strategic imperatives of Vision 2025 served as our roadmap for successfully navigating this historic downturn. While a portion of Vision 2025 was successful or was focused on fundamentally resetting our cost structure and organization to better align with a much smaller market, the strategy also addressed important investments in people, process, product, and technology.
I expect that these investments will enable Loan Depot to emerge from the market downturn a more efficient and durable company. The company’s return to profitability during the 3rd quarter marked the successful completion of Vision 2025.
With the announcement of a new 3 year plan, Project Northstar, it is the logical time for me to make way for a new leader. We recently announced the details of the transition which confirmed that I will step down as CEO and board member effective with our annual meeting of stockholders on June 4th.
After the annual meeting, I will continue to support Loan Depot as an adviser to the board. During my remaining time at Loan Depot, I look forward to working tirelessly to support our founder and board chair, Anthony Shea, who has agreed to return to the company as executive Chairman of mortgage originations, leading our origination, servicing, operations, and related activities.
The successful completion of Vision 2025 was a critical step in the company’s evolution. I’d like to express my deepest appreciation for Team loanDepot for all their hard work and effort over the past several years executing the plan.
We have a truly exceptional team that approaches every single day with the goal of making the dream of home ownership a reality for our customers. As we look forward, we believe that we are positioned to accelerate revenue growth and continue our progress towards sustainable profitability as we pivot toward the next chapter in LoanDepot’s story.
The housing and mortgage markets remain challenged, no doubt, but they are substantial in size and hold many opportunities for LoanDepot to grow and to realize its strategic objectives.
When the market inevitably recovers, I believe the company is well positioned to become the lender choice for the American homeowner to buy, manage, and optimize their home ownership journey. In closing, I want to thank every member of Team Loan Depot, our critical business partners, and our board of directors for their support, without which we could not have achieved the substantial critical progress the company has made over the past three years.
With that, I will now turn the call over to Dave, who will take us through our financial results in more detail.
David Hayes
Thanks, Frank, and good afternoon everyone. In the interest of time, I’ll focus my comments on the quarterly results. We reported an adjusted net loss of $47 million in the fourth quarter compared to an adjusted net loss of $27 million in the fourth quarter of 2023 due primarily to higher volume related expenses offset somewhat by higher adjusted revenues.
As you might know, the accounting for loan origination is subject to timing, with much of the revenue recognized at the time of the interest rate loss and much of the expense recognized at the time of the origination. A meaningful increase or decrease in volume from quarter to quarter, such as we saw from the 3rd to 4th quarter, can have a noticeable impact on our financial results.
During the fourth quarter, pull through weighted rate lock volume was $5.6 billion which represented a 27% increase from the prior year’s volume of $4.4 billion and reflected the impact of our investment in recruiting and developing our loan officers.
Rate lock volume came in within guidance we issued last quarter of $5.5 billion to $7.5 billion and contributed to adjusted total revenue of $267 million compared to $251 million in the fourth quarter of 2023.
Our po through weight to gain on sale margin for the fourth quarter came in at 334 basis points above our guidance of 285 to 305 basis points and compared to 296 points in the prior year. Our higher gain on sale margin primarily benefited from wider overall margins across our product set and a channel mix shift away from Jay-Z toward our retail and direct channels.
Our loan origination volume was $7.2 billion for the quarter, an increase of 34% from the prior year’s volumes of $5.4 billion. The increase reflected the pickup in lock activity during the 3rd quarter, stemming from a temporary decrease in market rates.
This increased lock volume was concentrated in September and therefore resulted in closings during the fourth quarter.
This was also within the guidance we issued last quarter of between $6 billion and $0.08 billion dollars. Servicing fee income decreased from $132 million in the fourth quarter of 2023 to $108 million in the fourth quarter of 2024 and is in line with the decrease in the size of the portfolio resulting from the second quarter of bulk sales.
We hedge our servicing portfolio, so we do not record the full impact of the changes in fair value and the results of our operations. We believe the strategy protects against volatility in our earnings and liquidity. Our strategy for hedging the servicing portfolio is dynamic, and we adjust our hedge positions in reaction to changing interest rate environments.
Our total expenses for the 4th quarter of 2024 increased by $39 million or 13% from the prior year. The primary drivers of the increase were higher volume related commission, direct origination, and marketing expenses.
Looking ahead to the first quarter, we expect pull through weighted lock volume of between $4.8 billion and $5.8 billion and origination volume of between $4.5 million and $5.5 billion.
Volume guidance reflects the seasonal decrease in purchase activity. We expect our first quarter pull through weighted gain on sale margin to be to be between 320 and 340 basis points.
Our total expenses are expected to decline in the 1st quarter, primarily driven by lower volume related expenses and also lower GNA expenses.
Our cost reset focus on creating positive operating leverage and balance sheet management activities have significantly reduced our risk profile and charted a path towards profitability while allowing us to maintain a strong liquidity position. We ended the quarter with $422 million in cash.
We grew revenue, expanded margins, reduced our corporate debt, and made important investments in productivity initiatives that benefited both the quarter and the year. Importantly, during the third quarter, we demonstrated our significant operational progress by achieving profitability during a period of modest market improvement, and we believe we are well positioned to capture the benefits when the market eventually recovers.
Our investments in products and operating leverage will provide the foundation for additional momentum in 2025 and beyond.
With that, we’re ready to turn it back over to the operator for operator.
Operator
(Operator Instructions) Douglas Harter from UBS. Your line is open.
Douglas Harter
Thanks. Can you talk about how you’re viewing your current, cash liquidity situation and, kind of as part of that, what you would expect for servicing balances over the course of 25?
David Hayes
Yeah, hey, Doug, it’s David Hayes. As you guys know, we, we’ve talked about this over the past quarters that we have maintained heightened levels of liquidity considering the challenging mortgage market, and we expect to maintain heightened levels of liquidity over that period.
We think we’re running at excess liquidity levels and so we’ve talked before about maintaining. At least a 5% around a 5% of assets of liquidity is sort of a target in this challenging market, and I think that’s something we’ll aim to do over the course of 2025.
Douglas Harter
Got it. And I guess just on the MSR outlook, kind of how you think that’ll that’ll play out. Do you expect more sales, or kind of regular way, kind of flow agreements?
David Hayes
Yeah, no, I think our view is we’re going to TRY to maintain and build the servicing asset. We view that as a very strategic asset for the company, but obviously in periodic times over the course of the last few years we’ve had to sell that from time to time to meet some liquidity needs, but for now we’re going to continue to TRY to invest and grow that asset.
Douglas Harter
Great, thank you.
Operator
Derek Summers with Jeffrey.
Hi, good afternoon. Could you speak to what the drivers of, the sequential increase in the GNA expense and, servicing expense, were?
David Hayes
Yeah, the biggest is that GNA was a bit of, kind of subsidized last quarter. We had a big insurance recovery related to, in the third quarter it related to the cyber event. We took a large reserve in the second quarter and got the insurance recovery in the third quarter, so that was kind of understating expenses.
So it’s kind of kind of a return to normalization in the fourth quarter, and then generally just in the expense profit, we talked about investing in LOs and operations and carrying excess capacity, so that’s also impacted a little bit of the fourth quarter.
You know That that’s largely the explanation for the sequential change on that front from a servicing perspective, I think it’s just the normal seasonality of the portfolio.
We have seen a little bit of a tick up in our delinquency rate which is attracting a little more expenses from a servicing perspective, but they’re still, well below historical norms. They’re kind of coming off a historical norm perspective, so no concerns from that perspective on our end.
Got it. And just in terms of the volume guidance for one, kind of what, kind of backdrop are you embedding in that guidance and, how does that compare to, third party estimates?
David Hayes
Yeah, so we’re setting our guidance software expectations of sort of our our LO counts and a lot of the investments we’ve made into the business. So we are expecting blocks to come down sequentially, kind of in line with normal seasonality in the business.
That being said, I think if you look at some of the third party estimates, they’re showing a more significant decline sequentially, and so we are, hopeful that we can pick up some share gain in that in that period.
Okay, thank you for taking my question.
Operator
(Operator Instructions) Jon Davis with Raymond James.
John Davis
Hey guys, Taylor on for JD. Maybe just to start on your hiring expense plans in 25 with the expected rebound in mortgage originations, just how we think about the operating leverage of the business going to next year, assuming, the increase in mortgage originations does in fact pay out, play out.
David Hayes
Yeah. Yeah, like I said, we’re, we’ve been investing strategically over the course of the 3rd and 4th quarter into our kind of revenue generating and expense side, or LOs and our operations team, and if we lay that against the, let’s say the NBA or the mortgage growth expectations in some of the third party, we would naturally expect.
The operating leverage to increase, we find LO productivity to get more productive as refinance markets start to materialize. So we should see better pull through on a revenue to profitability perspective in that regard.
And then just generally speaking it’s our expense perspective, that’s where the hiring will be for the course of 2025. We’re not expecting any significant back office or GNA expenses in fact modest reductions on that.
John Davis
Front okay, got it, thank you. And then just one more, on Project North.
Douglas Harter
Star, just obviously.
John Davis
Early days here, but just curious if you’ve, if there’s any updates with any of the initiatives, whether that be traction and expanding geography, JVs cost saves or anything else. Thanks.
Frank Martell
Yeah, I’ll handle that. Look, I think Project Northstar, as was unveiled last quarter, so it’s in formative stages, but we’re already investing in the technology platforms that will enable a lot of our our operating efficiency and reduced cycle times and improved customer experience.
So a number of those are in flight and we expect those to be progressively more impactful as we get into this year and certainly next year.
So, I think that’s all in good order. I think we’ve also announced two new JVs Jeff. Jeff can talk a little bit about those because we expect those to come online over the course of next year as well, but Jeff, yeah, we’re this is Jeff Walsh.
We’re actively on boarding now our partnership with Smith Douglas and with Onyx Homes, and we fully anticipate having those onboarded in 2025 fully and fully ramped in 2026 and also looking for additional opportunities in that space aggressively.
John Davis
Got it. Thanks guys.
Operator
(Operator Instructions) Mr. Frank Martel, I will turn the call back over to you.
Frank Martell
Thanks, Abby. Look, on behalf of Dave Gerhard, Jeff Walsh, and Jeff Deguurian, and the rest of our team, I want to thank everybody for joining us again today.
I’m proud of the dedication, resiliency, and accomplishments of Team Loan Depot. The completion of Vision 2025 represents a significant and hard fought victory for the company.
And Project Northstar, I believe, lays the foundation for a brighter future as the mortgage market comes back, and it certainly will come back. It’s a big market.
Home means everything and it’s central to the American dream. I believe the company is really well positioned to meet the needs of a changing demographic, homeowners and home buyers through our unique products and Team Loan Depot’s direct engagement with our customers. So thanks again to everybody for joining the call.
I appreciate your support and the call will conclude now.
Operator
And ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.
