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loanDepot plans to launch ‘digital’ HELOC in Q3

The lender said time from application to funding the loan will take as little as seven days

Nonbank heavyweight loanDepot will unveil a home equity line of credit (HELOC) product in the third quarter of 2022, the first offering of its recently launched mello business unit.

Fast-rising mortgage rates, recently cresting above 5%, have reduced refinance volumes by 70% year over year as of the end of April. The lender seeks to expand its product portfolio to help compensate for the lost volume, like most competitors.

Surging house prices have made home equity products an obvious choice for lenders to invest in, given the value of homes used as collateral for such loans are rising. Black Knight reported that tappable equity available to homeowners nationwide reached $446 billion in the fourth quarter of last year — despite $80 billion in equity being drawn down by 1 million homeowners over the same period.  

“Home equity is at an all-time high, and many homeowners would benefit greatly from an easier and faster way to access that capital,” Frank Martell, loanDepot’s president and CEO, said in a statement.

The mello HELOC will be a digital-first product, according to the company. “Consumers will apply and get approved online in a matter of minutes and gain access to funds in as little as seven days,” loanDepot said in announcing the new HELOC offering — which will be supported by the lender’s “proprietary tech stack.”

Prospective borrowers can talk to a licensed loan officer if they prefer during the approval process, however.

In a traditional home equity product, the lender disburses a lump sum upfront to the borrower, who then pays the loan back in fixed-rate installments. A HELOC, by contrast, is a revolving line of credit that allows borrowing as needed, with a variable interest rate. 

“Today’s consumers are facing a trifecta of economic pressures: rising interest rates, high inflation and economic uncertainty,” Zeenat Sidi, president of loanDepot’s mello unit, said. She added that funds from the new HELOC product can be used by customers for a variety of purposes, such as consolidating their debt to achieve lower monthly payments, including credit card debt; or to renovate their homes to improve their quality of life. 

In March, California-based loanDepot announced the creation of a division called mello, under the leadership of the digital-technology veteran Sidi. The new unit focuses on developing mortgage-adjacent lending products and services. 

Mello’s unit, which shares the name of the software platform loanDepot launched in 2017, operates side-by-side with the company’s mortgage origination and servicing division. 

The new unit includes the customer contact center, the mello DataMart, and the performance marketing engine. In the next few years, a key strategic focus for loanDepot is realizing business from its lead generation operations.

The company recently announced changes in its leadership. Besides Sidi, LoanDepot also hired George Brady, a longtime executive at Capital One, as a chief digital officer. He will focus on refining and building out the lender’s technology stack. LoanDepot’s former chief information officer, Sudhir Nair, left in January.

However, the most significant change is that Anthony Hsieh will become the executive chairman, no longer leading daily operations. Hsieh, who is loanDepot’s main shareholder, founded the mortgage lender in 2010, serving as chairman and CEO for the past 12 years. Martell was hired for a newly created position as president and CEO. 

Last year, loanDepot’s origination volume topped $137 billion, an increase of 36% year over year, though gain-on-sale margins, profitability and the company stock price all fell. The company achieved a 3.4% market share for the entire year, up from 2.5% in 2020. The company is expected to report its first-quarter earnings on May 10.

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