Moody's lowers loanDepot

Moody's Investors Service said it downgraded to B3 from B2 LD Holdings Group, LLC's (loanDepot) corporate family rating and its backed senior unsecured bond rating to Caa1 from B3. The agency changed the outlook to stable from negative.

“The downgrade of loanDepot's ratings reflects Moody's expectation that it will only return to profitability toward the end of the year at the earliest. The company reported a loss of $224 million in the second quarter following a $91 million loss in the first quarter. Excluding non-recurring items and fair-value marks on its mortgage servicing rights (MSR) assets, Moody's said that loanDepot's core tax-adjusted second-quarter net loss was around $135 million. The company's weak performance was driven by lower origination volumes, lower gain on sale margins and still elevated expenses,” the agency said in a press release.

The healthier outlook reflects the challenging operating conditions in the mortgage sector that will continue pressuring loanDepot's profitability, making it challenging for the company to cut financial leverage over the next 12-18 months, Moody’s said.

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