ANGELES ó LoanDepot is less than a decade old, but itís
quickly become one of the nationís biggest mortgage
firms ó and itís still growing.
one of a handful of alternative lenders, led by market
leader QuickenLoans, that have picked up a big share of
the mortgage market as banks have pulled back. Last
year, LoanDepot issued $29 billion in loans, more than
double the volume it originated in 2014, and also ramped
up profits. It made $58 million in the first half of
last year after making $15 million in all of 2014.
Hsieh, the Los Angeles-area firmís founder and chief
executive, hopes to keep that growth going, in part by
allowing borrowers to get mortgages through a completely
online process, something he has been striving for since
the late 1990s.
there have been setbacks. In November, the company
scrapped a plan to go public, a move that now looks
prescient. The initial public offering was scheduled for
what turned out to be a tumultuous week for Wall Street,
one that came just before a stock market rout that sent
the Standard & Poorís 500 index down more than 10
percent in the next three months amid concerns about the
Los Angeles Times spoke to Hsieh about LoanDepotís IPO
prospects, how the mortgage business has changed since
he started his first online-focused mortgage firm and
whether LoanDepot is a mortgage lender or a tech
company. Here is an excerpt of that conversation.
When will you go back to the public markets?
It is a trigger that we can pull at any given time. The
market today is not friendly. We have no control over
that, but once that changes, it is an option. Thatís
the beauty of a profitable, positive-momentum company.
The marketís sentiment is tied into concerns over the
economy, which is closely linked to the housing market.
Whatís your take on the future of housing market, the
key driver of your growth?
The U.S. housing market today is in a unique position
compared to historical cycles. This is especially true
now that international buyers have a relevant portion of
real estate holdings in most major markets, along with
institutional holdings. With the formation of households
by millennials, steady income growth and low interest
rates continuing for at least this year, housing should
remain at healthy levels with affordability.
LoanDepot started out offering just mortgages, but you
now offer personal loans, something most mortgage
lenders donít. Why add personal loans to the mix?
Americans are serial credit users. They donít just use
credit one time. They use credit repeatedly. If your
organization doesnít have these other products, the
customer will go to a personal loan lender who might
ultimately start offering home loans. And if they do
that, the customer could be lost for life. Before,
everybody was segmented. Someone handled personal loans,
someone handled car loans, someone handled home loans.
Now, if car loan lender in the future starts offering
mortgages, I am going to lose that customer.
In filings for your IPO, you positioned LoanDepot as
more of a tech company, which would demand a higher
valuation than publicly traded mortgage lenders like PHH
and PennyMac. Afterward, you even called LoanDepot a
"unicorn." Do you need to rethink that story?
LoanDepot is a platform story, not just a mortgage
story. Mortgage is a big piece of it and is also the
biggest opportunity. What was interesting is when we
were out on the road show ahead of the IPO, we were
never compared to PHH or PennyMac. We are fundamentally
different. Other firms didnít have our market growth.
We went, in six years, to a $1 billion revenue company
that has been profitable and is fueling its own growth.
To compare us with any other company I think would be
difficult, other than to our No. 1 competitor, which is
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But investors donít seem sold on other lending
"platforms." Lending Club, a personal lender,
and On Deck, a small-business lender, also call
themselves platform lenders, and they have seen their
stocks fall dramatically.
At the end of the day, it is the public investor
sentiment that matters. If you look at Lending Clubís
last four or five quarterly announcements, they did
exactly what they said they were going to do, but they
still got penalized over it. The reason why is purely
public investor sentiment, which is, "Wow, when are
you finally going to make money?" The sentiment
plays into our position a lot.
You started LoansDirect.com in 1999. It was the early
days of the online mortgage business. What has changed
That was when, for the first time, a consumer could log
on to LoansDirect.com, fill out all the necessary info
and it returned a digital approval. The approval would
be a conditional approval ó that is, if you told me
you make $5,000 a month, youíre approved based on us
verifying that. Even today, much of it is still
conditional approval. Weíre getting close to a final,
not conditional, approval.
What needs to change to get to that point?
Income documentation, the appraisal, bank statements ó
most of these requirements are still manually done today
in the industry. Moving forward, most of that will be
automated and digital. That really cuts down on the
amount of labor that is required and most importantly it
cuts down on the level of work and time invested from a
consumer that wants to get a home loan.
If I apply for a mortgage from LoanDepot, how much of
that process am I able to do just on my phone or my
We certainly will allow the customer to dictate the
involvement that they want to have. Some consumers, as
an example, donít want to talk to us. Theyíve done
many home loans. Theyíre very savvy. They just want us
to service them. The communication is 100 percent
digital. There are some consumers that prefer to talk to
us. So we employ this hybrid model where we allow the
consumers to tell us what they are comfortable with and
how they want to interact with us.
QuickenLoans ran a Super Bowl ad about how quickly it
can offer mortgages through a new app, leading to people
buying other stuff and boosting the economy. I think it
struck a nerve with people who remember how easy it was
to get a loan before the bust. Shouldnít getting a
loan of hundreds of thousands of dollars be a little bit
of a hassle?
No. That a home loan can take 30 or 40 or 50 or even, at
a bank, 60 days is completely ludicrous. You are not
going to find out any more data in 30 days than you can
find out in the next 30 minutes. That type of grind to
the consumer and the anxiety of whether I can get
approved or not approved is completely not necessary.
As a consumer, why do I need the process to be faster?
Imagine youíre in the middle of escrow and, at the
same time, youíve been putting off the decision about
buying a new car. You call your loan officer and say,
"Iím on my way down to the auto dealership to
trade in my 7-year-old car for a new car." The
first thing your loan officer is going to tell you is,
"Donít do that until after you close
escrow," because what is going to happen is you are
going to increase your monthly debt payments and that
might trigger something. So instead, you close your home
loan, you move in and then the very next day you go and
buy a new car. Did that change your risk position? No.
Itís just not logical. If you donít trust this
person to buy a new car, why would you give this person
a 30-year loan?