On a Wednesday evening in November 2015, Anthony Hsieh was about to dig into a celebratory dinner in a conference room on the top floor of Morgan Stanley’s midtown Manhattan offices. His then-five-year-old mortgage lender LoanDepot was set to go public on the New York Stock Exchange the following day. It would have been a dream come true for the first-generation Taiwanese-American immigrant who began his career in the mortgage industry as a commission-based loan officer. But Hsieh was troubled by the turbulent markets—Jack Dorsey’s Square was forced to price its IPO lower the following week—and in a last-minute decision, he pulled the plug.
“It felt like a last meal at the time. I second-guessed myself many times after that,” he says in a Zoom call from New York while on a business trip in early April, reminiscing on his first attempt at a public listing. “But looking back now, that was absolutely the right decision.”
That bet paid off. After five years of steady growth, Hsieh, 56, finally took LoanDepot public this past February in an IPO that made him a billionaire thanks to his 54% stake in the company, part of an estimated $2 billion fortune that includes an Orange County mansion he bought for a record-breaking $61 million in October. But timing markets is a fool’s errand. In an echo of 2015, LoanDepot again marked down its IPO at the last minute, offering far fewer shares than it initially expected to, due to low demand and the potential of higher interest and mortgage rates. (Only 3.2% of its shares are publicly traded, and Forbes applies a discount to shares owned in any company with a float smaller than 5%; Hsieh says the company plans to offer more shares and increase its float in the future.)
An industry veteran who started—and sold—two mortgage lenders prior to launching LoanDepot in 2010, Hsieh saw an opportunity in the carnage left behind by the financial crisis and the collapse of industry giants Countrywide Financial and Ameriquest. With a unique combination of a tech platform that helps drive down the cost of securing new customers and a network of more than 2,500 loan officers spread across the country, LoanDepot has been well positioned to reap the benefits of a surging mortgage market over the past decade. Millions of Americans are taking advantage of rock-bottom interest rates and fueling a housing boom that’s sent home prices to record highs and spurred a wave of refinancings, all while lining the pockets of billionaire mortgage lenders from Hsieh to Dan Gilbert of Rocket Companies and Mat Ishbia of United Wholesale Mortgage.
“LoanDepot has got a best-in-class technology platform and strong brand awareness,” says Ryan Carr, a senior associate at investment bank Jefferies. “It helps [them] disproportionately capture a higher share of first-time homebuyers, which is becoming an increasing percentage of the cohort.”
Hsieh likes to quip that LoanDepot is the Lyft to Rocket’s Uber, with the two companies competing over which tech platform can best appeal to first-time buyers and lock in customer loyalty. LoanDepot’s mello platform uses machine learning to streamline the mortgage process for customers and its data collection makes it easier to sell them on refinancing with the company down the line, an approach that has brought concrete results: 72% of customers who got their first mortgage with the company also refinance their loans with LoanDepot, four times the industry average of 18%.
Still, not everyone is enamored with the company’s tactics, which can veer towards the aggressive: LoanDepot is fighting two proposed class action lawsuits alleging it made excessive robocalls hawking its mortgages. The company says it “denies the allegations in these cases and is vigorously defending both matters.” Of the four customers with whom Forbes spoke, three described being enticed by low rates and an easy-to-use online platform, before later getting stuck with ill-equipped agents located thousands of miles away to complete the process or waiting for months to actually close on their loan. LoanDepot points to its high customer ratings averaging above 4 stars across a number of online platforms including Google, LendingTree, Zillow and TrustLink.
In just eleven years, the California-based upstart has grown to become the seventh-largest mortgage lender in the U.S., according to trade publication Inside Mortgage Finance, with roughly 3% of the $11 trillion market for new mortgages. LoanDepot’s profits rose by a staggering 5,750% to $2 billion in 2020, while revenues more than tripled to $4.3 billion.
“We just eclipsed Bank of America, and now we’re only behind Rocket and iconic American banks like Chase and Wells Fargo,” says Hsieh. “We’re well-positioned and we’re very excited about the next 10 years.”
Anthony’s Hsieh’s first decade in California was a bit more challenging. He was born in Taiwan and lived there for eight years, before flying to Los Angeles with his parents and two younger sisters in 1973. Within 24 hours of getting off the plane, he attended his first day at an American public school—”quite an interesting experience,” he now says. After a few years in L.A., his family moved south to settle in Orange County, where Hsieh has lived ever since.
“Not knowing any English and not knowing the dress code, I experienced the immigrant life from very, very early on,” he recalls. “I learned English through watching Bugs Bunny on TV.”
As a college student at Cal State Fullerton in the mid-1980s, Hsieh was barely getting through his studies as a business major. He preferred to spend his time surfing or fishing rather than hitting the books, and he kept busy playing baseball at night and working a side gig as a stereo installer. At a baseball game one night in 1986, the then-21-year-old found out one of his teammates had gotten hired as a loan officer at local mortgage broker Tricor—a job that Hsieh had never heard of at the time.
“I asked him what that is, and he said, ‘I loan money to people.’ And I said, ‘well you don’t have any money, you’re broke!'” Hsieh says with a chuckle. “He goes, ‘no, I help other people get a loan.’ So I was intrigued, and I went in for an interview and got hired on the spot.”
Hsieh graduated with a business degree three years later, all while working two jobs to support himself, pay his parents’ monthly mortgage payments and stash away some savings. “Everybody else was out there partying and I was working two jobs, trying to learn to be a loan officer,” he says.
At age 24, after three years in the business, Hsieh decided to cobble together his funds and make an offer to Tricor’s owners to buy them out. With $30,000 down and monthly payments for another year and a half, Hsieh took over Tricor for just under $300,000 (about $650,000 today) in 1989. For a while, that first bet on the mortgage industry appeared to be an expensive mistake: Hsieh spent a decade fighting off class-action lawsuits for unethical practices he claims were committed by the firm’s previous owners.
But by 1999, the dot-com bubble was in full swing and Hsieh decided to start offering prime loans—mortgages given to borrowers with good credit—on the Internet, rebranding the company as LoansDirect.com and paying $900,000 for the URL.
“We were a small company and we decided to abandon the old brick-and-mortar model and actually go direct to the consumer. And it worked,” says LoanDepot’s executive VP of production Tomo Yebisu, who first met Hsieh when they were both loan officers at Tricor.
Hsieh sold the fast-growing business to online broker E-Trade Financial in 2001 for $56 million and settled into early retirement at age 35. But he quickly grew restless: “I completed the American dream and got rich, and what I’ve discovered is it was very unfulfilling and very boring not to have anything to do.”
When his non-compete clause from the E-Trade deal expired the following year, Hsieh used his newfound wealth to launch his second company, HomeLoanCenter.com, which built on LoansDirect’s legacy by expanding beyond prime loans into a host of other products—such as home equity loans and second mortgages, as well as the much-maligned subprime loans that later led to the housing crash—and offered them online in all 50 states. Two years in, the company had grown to become one of America’s largest digital mortgage lenders with 3,000 employees, and its success drew the attention of billionaire IAC chairman Barry Diller. Online lender LendingTree, then a unit of IAC, acquired HomeLoanCenter.com in 2004 for an undisclosed amount.
Hsieh stayed on to run the unit until late 2007. As he readjusted to a second retirement—Hsieh built a professional fishing team and established an all-time record for most tournament wins, pocketing more than $7 million in prizes—the housing market was beginning to crumble.
“I watched the entire financial crisis from the sidelines as the entire world melted down financially,” he says. “Visually in my mind there was just a mushroom cloud.”
Once again, it didn’t take long for Hsieh to ditch retirement and dive back into the mortgage industry. The first attempt of his third act, an “alternative mortgage lender” called Grander Financial, offered cash in return for a stake in people’s homes, but it failed to catch on and Hsieh sold his stake one year later in 2009. Still, he saw an unmissable opportunity in the collapse in the supply of mortgages caused by the crash of former industry titans such as Countrywide, which controlled 22% of the market before its demise.
“The demand side of homeownership is going to continue, but the supply side has been destroyed,” he remembers thinking at the time. “I realized that it’s my turn to go after that king’s chair.”
In 2010 he launched LoanDepot, again with the idea of building another tech platform to market mortgages to consumers as efficiently as possible. With their largest non-bank competitors swept away and some banks quitting the mortgage business, established lenders such as Dan Gilbert’s Quicken Loans (now known as Rocket Mortgage) were growing rapidly, and Hsieh wanted his own cut of the market.
It seemed like an odd bet to some: “I said, ‘Anthony, haven’t you been watching? It’s been mortgage armageddon, what are you talking about?’” recalls Yebisu. But Hsieh was adamant, and Yebisu soon joined him in his new endeavor.
Within three years, LoanDepot was licensed in every state and had acquired a smaller mortgage broker. Hsieh’s decades of experience and significant personal wealth gave him the ability to get past the high barriers to entry in the mortgage industry—startup costs and securing approval from government-sponsored companies such as Fannie Mae and Freddie Mac requires significant time and money—but he was still years away from taking sizable market share from the likes of Rocket. So LoanDepot set about developing the mello platform, which launched in 2017 and made it faster and easier for customers to get mortgages online while also simplifying the onboarding of new loan officers at brick-and-mortar locations.
“That mello platform allowed them to take advantage of the overwhelming demand that occurred in 2020 when [interest] rates fell,” says Carr at Jefferies. “Many competitors weren’t equipped with the right capacity to be able to address that much demand.”
There are still plenty of challenges ahead. Most of the lenders that have recently gone public—including Dan Gilbert’s Rocket Companies (August 2020), Mat Ishbia’s United Wholesale (February 2021) and LoanDepot (February 2021)—are trading at or below their IPO price. Several other lenders abandoned their plans for listing and chose to accept acquisition offers instead. Adding to investor concerns is the fact that mortgage rates, while low by historical standards, have been rising lately in a signal that the wave of refinancings could be slowing down.
“You may need the refinancing wave to come off and expectations to get reset a little bit lower before investors are willing to jump in,” says Mark DeVries, a senior research analyst at Barclays.
Hsieh stresses that LoanDepot’s unique mix of a recognizable brand, leading tech platform and on-the-ground presence will set it apart from its competitors beyond the current interest rate cycle. “The customer will pick and choose which flavor they wish to be served,” he says. “If they want to do it completely online and not talk to a human, they can do that. If they need hometown support, they can do that as well.”
Regardless, LoanDepot expects its market share of new mortgages and refinancings to grow from its current 3.2% to more than 4% by the end of the year, compared to United Wholesale’s 3.8% and Rocket’s 8.3%. The company is also investing in brand awareness, sealing a multi-year deal with the MLB’s Miami Marlins in March to rename their arena LoanDepot Park.
For now, Hsieh is confident he’s taken LoanDepot public at the right time and optimistic the good times will go on: “It feels like we’re having our cake and eating it too.”