loanDepot Adds Home Equity Loan to its equityFREEDOM Suite of Home Equity Products

Rhea-AI Summary

loanDepot (NYSE: LDI) has introduced a new home equity loan to its equityFREEDOM product suite, addressing the record $32.7 trillion in home equity held by Americans. This addition, along with their existing HELOC offering, provides homeowners with powerful financial tools to access equity without sacrificing low mortgage rates.

The equityFREEDOM Home Equity Loan offers:

• 20-year, fully amortizing loan with no prepayment penalty
• Borrowing up to $350,000 based on credit profile and CLTV
• Maximum 90% CLTV
• Potential for significant interest savings compared to high-interest credit cards

loanDepot aims to help homeowners manage financial health and combat inflation through these equity-based solutions, with plans to further expand the product suite later this summer.

Positive

• Introduction of new home equity loan product to tap into record $32.7 trillion in home equity
• Potential for significant interest savings compared to high-interest credit cards (up to $21,574 over 3 years on $50,000 balance)
• Flexible borrowing options up to $350,000 with 90% CLTV for home equity loan
• Expansion of product suite with planned first lien home equity line of credit launch

Negative

• None.

Insights

Financial Analyst

loanDepot's introduction of the new equityFREEDOM Home Equity Loan is significant due to its timing and market context. With $32.7 trillion in home equity and a majority of mortgage holders enjoying rates below 4%, tapping into home equity becomes a compelling financial strategy. Notably, many consumers are burdened with high-interest credit card debt, averaging above 24%, making a lower-interest home equity loan an attractive option.

The potential savings on interest payments, as illustrated in the provided comparison, are substantial. However, retail investors should note that while this product offers relief from high-interest debt, it also transfers unsecured debt into secured debt, increasing the risk of losing one's home in case of default.

Moreover, given the current economic climate with rising inflation, these loans might become more attractive. Still, an increase in borrowing might also signal an economic strain on consumers, which could reflect broader economic vulnerabilities. Additionally, loanDepot's ability to process these loans quickly and without prepayment penalties adds a competitive edge, potentially driving loan volumes higher in the short term.

In the long term, however, the company’s reliance on the housing market's health is a risk factor, particularly if property values were to decline.

Market Research Analyst

loanDepot's move to expand its home equity products addresses a critical market need. As inflationary pressures push consumers to seek more sustainable debt management options, this home equity loan provides a viable alternative. By offering flexible borrowing limits—up to $350,000 with a maximum 90% CLTV—loanDepot is positioning itself to cater to a wide range of financial needs, from home renovations to debt consolidation.

However, it's important to keep in mind the competitive landscape. Other lenders also offer similar products, which means loanDepot's success will depend on how effectively it can market this new loan and leverage its quick processing times and favorable terms. Additionally, investors should be aware of regional differences in housing markets which could affect the uptake and performance of these loans.

This expansion could also indicate a strategic pivot by loanDepot to diversify its product offerings, possibly to mitigate risks associated with a slowdown in traditional mortgage originations. Investors should monitor how this product impacts the company's revenue streams and market share over time.

Enables homeowners to tap record levels of equity while maintaining lower primary mortgage rates

IRVINE, Calif.--(BUSINESS WIRE)-- loanDepot, Inc. ("LDI" or "Company") (NYSE: LDI), a leading provider of home lending solutions that enables customers to achieve their financial and homeownership goals, today introduced a new home equity loan to its equityFREEDOM product suite. Americans hold a record $32.7 trillion¹ in home equity and of those who are still paying a mortgage, 63% carry an interest rate below 4%². The equityFREEDOM Home Equity Loan, along with the equityFREEDOM Home Equity Line of Credit (HELOC), gives those homeowners powerful financial tools to lower their cost of borrowing without sacrificing their current mortgage rate.

“Being a homeowner brings certain advantages, one of which is access to more tools for managing your financial health and wellness,” said LDI President Jeff Walsh. “Most Americans are feeling the pinch of inflation. In fact, non-housing related consumer debt has skyrocketed to nearly $5 trillion³ as families lean on high-interest credit cards and personal loans to cover their living costs. When used wisely, home equity borrowing can be a sorely needed source of relief, which is why we’ve added to our home equity lending portfolio with this new home equity loan.”

How consumers save vs. credit card debt⁴

With the average credit card interest rate in the country sitting at more than 24%⁵, homeowners with $50,000 in credit card debt could save more than $21,000 in interest over a three-year period by opting for a home equity loan. And, in many cases, the interest may be tax deductible.⁶

	Credit Card	Home Equity loan7
Balance	$50,000	$50,000
APR	24.21%	9.99%
Interest paid over 3 years	$36,178	$14,604
ESTIMATED INTEREST SAVINGS		$21,574

The equityFREEDOM Home Equity Loan application takes just minutes and lets customers access the equity in their homes in a lump sum through a 20-year, fully amortizing loan with no prepayment penalty. This loan can be used for large expenses such as home renovations, consolidation of high-interest credit card debt and personal loans, medical bills, or college tuition. It allows homeowners to borrow up to $350,000, based on their credit profile and their home’s combined loan-to-value ratio (CLTV), with a maximum of 90%, meaning a borrower may utilize up to 90% of the total available equity in their property between their first and second mortgage.

The equityFREEDOM Home Equity Line of Credit (HELOC) can take customers from quote to close in as little as three weeks, with flexible terms providing access to equity with a three-year draw period and, in most states, a 10-year interest-only payment period followed by a 20-year amortizing repayment term⁸. Homeowners may borrow up to $250,000, with a maximum of 90% CLTV.⁹

Said loanDepot Chief Education Officer Alec Hanson, “Every borrower has their own unique financial considerations. One may want the stability of the home equity loan’s fixed monthly loan payment, while another may need the flexibility of the HELOC, with the ability to pay down and redraw over time. For this reason, it’s really critical that borrowers work with a reputable mortgage professional who offers different product options and the consultative wisdom borrowers need to make the right decision for their short and long-term financial goals.”

loanDepot will continue to expand its equityFREEDOM suite of home equity lending products with a first lien home equity line of credit due to launch later this summer.

About loanDepot

loanDepot (NYSE: LDI) is a leading provider of lending solutions that make the American dream of homeownership more accessible and achievable for all, especially the increasingly diverse communities of first-time homebuyers, through a broad suite of lending and real estate services that simplify one of life's most complex transactions. Since its launch in 2010, the company has been recognized as an innovator, using its industry-leading technology to deliver a superior customer experience. Our digital-first approach makes it easier, faster and less stressful to purchase or refinance a home. Today, as one of the largest non-bank lenders in the country, loanDepot and its mellohome operating unit offer an integrated platform of lending, loan servicing, real estate and home services that support customers along their entire homeownership journey. Headquartered in Southern California and with hundreds of local market offices nationwide, loanDepot’s passionate team is dedicated to making a positive difference in the lives of their customers every day.

¹ As of Q1 2024, according to the Federal Reserve Bank of St. Louis, available at https://fred.stlouisfed.org/series/OEHRENWBSHNO.
² The Lock-In Effect of Rising Mortgage Rates, FHFA Staff Working Paper 24-03 (March 2024) available at https://www.fhfa.gov/sites/default/files/2024-03/wp2403.pdf.
³ As of Q1 2024, according to the Federal Reserve Bank of New York, Center for Microeconomic Data, available at https://www.newyorkfed.org/microeconomics/hhdc.
⁴ Average credit card APR for new card offers = 24.84% per Lending Tree on 7/8/24; HELoan example based on a 20-year fixed rate 2 mortgage with an initial balance of $50,000.
⁵ LendingTree data available at https://www.lendingtree.com/credit-cards/study/credit-card-debt-statistics/.
⁶ loanDepot encourages consumers to consult tax advisors for applicable requirements and details.
⁷ Unlike a credit card, home equity loans and home equity lines of credit require borrowers to pledge their homes as collateral for the debt.
⁸ In Texas, loanDepot’s HELOC includes a three-year interest only period followed by a 27-year repayment period.
⁹ loanDepot advises consumers that credit criteria, exclusions, and limitations apply; not all property types are eligible collateral; loanDepot’s equityFREEDOM products may not be available in all states; and terms and conditions are subject to change.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240715702489/en/

Jonathan Fine

VP, Public Relations

(781) 248-3963

jfine@loandepot.com

Source: loanDepot, Inc.

FAQ

What is the new product loanDepot (LDI) has introduced to its equityFREEDOM suite?

loanDepot has introduced a new home equity loan to its equityFREEDOM product suite, allowing homeowners to access their equity without changing their primary mortgage rate.

How much can homeowners borrow with loanDepot's (LDI) new home equity loan?

Homeowners can borrow up to $350,000 with loanDepot's new home equity loan, based on their credit profile and combined loan-to-value ratio (CLTV), with a maximum of 90% CLTV.

What are the terms of loanDepot's (LDI) new equityFREEDOM Home Equity Loan?

The equityFREEDOM Home Equity Loan is a 20-year, fully amortizing loan with no prepayment penalty, offering a lump sum access to home equity.

How does loanDepot's (LDI) home equity loan compare to credit card debt in terms of interest savings?

According to loanDepot's example, homeowners with $50,000 in credit card debt could save more than $21,000 in interest over a three-year period by opting for a home equity loan instead of carrying credit card debt at average rates.