Foothill Ranch-based LoanDepot LLC launched two businesses to expand its real estate lending, including one that competes against investor magnet and fintech giant GreenSky LLC.
“You’re seeing us extend the brand family to other areas of housing,” said Julian Hebron, loanDepot senior vice president of corporate affairs.
LoanDepot, founded in 2010 by Anthony Hsieh, has raced to become the second largest nonbank mortgage lender in the U.S. after Quicken Loans. It has more than $1 billion in annual sales and 6,000 employees, and recently spent $80 million to upgrade its online “mello” lending platform, which it introduced last March.
The new mello Home Improvement Venture will offer home-improvement loans of up to $75,000. Since the loans aren’t based on home equity, they don’t require appraisals and can be approved within a few days, Hebron said.
LoanDepot can refer homeowners to its verified licensed contractors. Likewise, the contractors can suggest the homeowner apply for a loan with LoanDepot at the point of sale.
“Consumers want as streamlined a process as they can get,” Hebron said. “They have confusion dealing with so many contractors.”
The point-of-sale fintech space has become a hot investment, thanks to GreenSky, an Atlanta-based company that has about 16,000 home-improvement contractors and retailers offering credit to GreenSky customers. The Wall Street Journal reported this month that Newport Beach-based Pacific Investment Management Co., one of the world’s largest investment firms, invested $200 million in GreenSky.
The story estimated GreenSky’s valuation at $4.5 billion, higher than the $2.6 billion initially placed on loanDepot when it attempted an ultimately unsuccessful initial public offering in 2015.
GreenSky’s financing is offered only online, lacking the advantages of loanDepot’s local loan officers, who are in close contact with buyers and sellers, Hebron said.
LoanDepot, which has more than 180 loan offices, said it conducted a survey that showed 96% of U.S. homeowners weren’t fully confident in choosing the best vendors for home-improvement needs.
“The difference with GreenSky is we have the local component with our network of local loan officers,” Hebron said. “We can also go to the contractor and offer them financed projects.”
Homeowners spend $4,000 to $6,000 a year on average on home repairs and upgrades, loanDepot said, citing statistics from Zillow and the National Association of Homebuilders. About half of homebuyers needed improvements on their newly purchased homes in 2016, and 83% of sellers made improvements before selling.
The second new loanDepot unit, mello Home, connects preapproved borrowers to real estate agents vetted by loanDepot.
Consumers aren’t charged for the service; real estate agents can join for free, then pay a marketing fee if a loan closes. LoanDepot said its survey found 81% of homeowners appreciated mortgage lenders who could recommend real estate agents.
“We have loan agents on the ground nationwide, and they can suggest local real estate agents,” Hebron said. “All the Realtors are vetted by our local sales force. It’s not some algorithm; it’s a human connection.”
