Through founder Anthony Hsieh, LoanDepot can trace its roots to the earliest days of online mortgage lending. Hsieh was making home loans in the late 1990s through a company he co-founded called LoansDirect.com — back in the big box desktop days of computers. That’s when a smartphone was the one attached to a fax machine.
Today, LoanDepot says it’s the “second-largest consumer nonbank lender” in the U.S. For the 12 months ending June 30, 2015, the company originated more than $22 billion in loans — mostly mortgages, although the company started making personal loans in May 2015.
LoanDepot faces stiff competition, especially online and mainly from Quicken Loans, which originated some $79 billion in mortgage loans in 2015.
So how does LoanDepot stack up in the mortgage loan and refinance arena? Here’s what we’ve learned.
AT A GLANCE
- Minimum credit score of 600
- Fixed-rate mortgages from 10 to 30 years
- Adjustable-rate mortgages and home-equity loans
A small, but growing, share of the mortgage market
LoanDepot is swimming in an increasingly crowded pool of providers: nonbank lenders. The company making the most waves is Quicken Loans. But LoanDepot is a scrappy — and optimistic — competitor.
“Nonbank lenders have grown market share from 10% of the consumer lending market in 2009 to 42% in 2014,” the company stated in its filing with regulators for an October 2015 initial public stock offering that was later abandoned. Even considering the 125% increase in its loan volume in 2015 compared to the year ending June 30, 2014, LoanDepot carves off just a tiny piece of the market.
“We had an estimated 2.0% market share in the home loan origination market as of June 30, 2015, as compared to approximately 1.0% as of June 30, 2014,” the company reported. However, that growth was particularly notable, LoanDepot added, because “banks have retreated, as evidenced by their decline in market share from 90% to 58% in the home loan market” from 2010 to 2014.
Typical mortgage underwriting standards
While LoanDepot may be an “alternative” (nonbank) lender, its underwriting standards are typical of most mortgage lenders. LoanDepot says that’s because the majority of mortgage loans are driven by Fannie Mae, Freddie Mac, FHA and other government-sponsored entities — in so-called “agency”-backed loans. But that process may be changing.
LoanDepot currently uses “proprietary risk engines” for its personal loan product offering and anticipates rolling out expanded credit modeling for mortgage loans in the future.
“We expect this to shift over time as private investors are anticipated to increasingly participate in the secondary market, and we believe we have the risk engines in place to take advantage of the shift away from almost exclusively agency home loans,” the company said in its securities-related filing.
SoFi, the student loan lender that now makes home loans, made a splash earlier this year by saying it would stop considering credit scores as a part of its mortgage decision process. But Brian Biglin, chief risk officer for LoanDepot, says credit scoring remains the bedrock of good risk management.
“During economically favorable times, lenders start to compete, and they invest millions of dollars to attract customers,” Biglin told MortgageOrb.com in a recent interview. “Customers have choices, and lenders reinvent the mousetrap, and one of the ways to do that is by increasing approval rates.”
But, Biglin said, credit scores are the great equalizer. “Everybody starts equally — that’s the great thing,” he told MortgageOrb. “They should build up with credit cards, an auto loan and establish this credit history. Then, they can borrow a couple hundred thousand dollars.”
What LoanDepot does best
- LoanDepot has a network of more than 150 local offices under the brands imortgage and Mortgage Master for customers who prefer to do business face-to-face.
- The company offers home equity loans; its biggest competitor, Quicken Loans, does not.
- LoanDepot provides conventional mortgages and FHA and VA loans, as well as HARP refinances — the federal loan program for homeowners whose homes are worth less than what they owe on their mortgages.
Where LoanDepot falls short
LoanDepot originates a full menu of mortgage loans in all 50 states, offering purchases and refinances, home equity loans, and FHA and VA mortgages. But there are things the lender could do better:
- As noted, LoanDepot does not use alternative credit data, opting instead to use the standard underwriting practices that most mortgage lenders use.
- The online lender is a bit short on the technology side, saying on its website that you’ll have to fax (who still has one of those?) or email documents related to your application. Not exactly secure methods. And in one instance, more than two hours into their stated weekday support hours, live chat was unavailable for a follow-up question.
- Although it’s an online lender, its process seems to center on phone contact. “Get Started Now” buttons send you to a brief contact form authorizing receipt of “autodialed and/or pre-recorded calls.”
LoanDepot is rated A+ by the Better Business Bureau, where 77% of 329 reviewers cited a positive customer experience, 21% said it was negative and just under 2% were neutral. Online reviews of the lender on Yelp, though — sorted by most recent date — were overwhelmingly negative when checked by NerdWallet for this article.
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Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @halmbundrick