O.C. mortgage lender files for IPO

A fast-growing mortgage lender in Orange County that has quietly become one of the nation’s biggest loan originators plans to go public.

Foothill Ranch firm LoanDepot on Thursday filed a registration statement with the Securities and Exchange Commission, reporting it plans to raise as much as $100 million in an initial public offering.

The company, founded in 2009, is a non-bank lender that originates loans and packages them into securities that are sold to investors. The vast majority of LoanDepot’s loans are sold to Fannie Mae and Freddie Mac, or are backed by the Federal Housing Administration.

FHA loans, which are aimed at first-time home buyers, have become a particularly big business for LoanDepot and other non-bank lenders. During the first six months of this year, the company was the nation’s fourth-largest originator of FHA loans, behind QuickenLoans, Wells Fargo - the only big bank - and Freedom Mortgage, according to trade publication Inside Mortgage Finance.

Guy Cecala, publisher of Mortgage Finance, said as Chase, Bank of America and other name-brand lenders have cut back because of tighter credit standards, non-banks have stepped in.

“The larger non-banks have been able to pick up the business that the large banks have given up on,” Cecala said. “They’re definitely growing by leaps and bounds.”

LoanDepot ranked 17th among U.S. mortgage lenders last year but has climbed to No. 11 through the first six months of this year, Cecala said. Last year, the firm originated $13.2 billion in loans, and through the first six months of this year, it’s already surpassed that number, issuing $14.3 billion.

That growth hasn’t come without some pain, as LoanDepot’s swift ascension has put it on regulators’ radar.

Last month, an independent inspector within the federal Department of Housing and Urban Development issued a report saying LoanDepot has been originating FHA loans that improperly use down-payment assistance programs. However, in a similar case, HUD officials have said down-payment assistance programs are being used correctly, indicating LoanDepot may be caught in what amounts to an intra-agency dispute.

A LoanDepot spokeswoman said the company looks “forward to the resolution of the disagreement and believes it will be resolved favorably.”

Still, the inspector’s report shows both why commercial banks are avoiding the FHA market and the risks LoanDepot is taking on by staying in.

“Anytime a LoanDepot or any other non-bank can offer these types of products, there tends to be less competition and more demand for it because there are fewer lenders willing to do those types of loans,” Cecala said. “One sign of their success is they’re attracting the attention of regulators.”

Though mortgages are LoanDepot’s main line of business, the firm has aspirations beyond home loans. In May, it started offering unsecured consumer loans – the same kind offered by online lenders such as Lending Club and Prosper. And in August, it announced plans to begin offering home equity loans.

The preliminary registration statement does not indicate how many shares or what percentage of its equity the company plans to sell. The filing does note, however, that LoanDepot founder and Chief Executive Anthony Hsieh and private equity firm Parthenon Capital will continue to own a controlling stake in the company.

Hsieh previously founded LoansDirect.com, which was later acquired by ETrade, and HomeLoanCenter.com, which was acquired by LendingTree, according to the company.

james.koren@latimes.com

@jkoren