E-Loan

E-Loan, Inc. is a financial services company that offers its users access to partners that may be able to assist them in obtaining loans.

E-LOAN, Inc.
Public
IndustryFinancial services
Founded1997
FounderJanina Pawlowski and Chris Larsen
HeadquartersNew York, New York, USA
Key people
  • Ignacio Alvarez
  • (CEO)
  • Richard Carrión
  • (Executive Chairman)
  • Camille Burckhart
  • (CIO)
  • Mariel Arraiza
  • (SVP)
ProductsSavings accounts & CDs; referral to partners for Loan products
Number of employees
Part of Popular, Inc., which has 8,000 employees
ParentPopular, Inc.
Websitewww.eloan.com

E-Loan was a pioneer in the online lending industry in the late 1990s and early 2000s. As of 1999, it was the number 1 site for online lending, with Quicken Loan's later online offering playing catch-up in 2nd after E-Loan declined a buyout offer.[1]

As of 2017, E-Loan is focused on its personal loan referral business, and as of May 15, 2017 all of its deposit customers were transferred to Popular Direct.[2][3]

E-Loan is a division of Banco Popular de Puerto Rico.

History

E-Loan was founded by Janina Pawlowski and Christopher Larsen in 1997. Former co-workers at a California-based mortgage lender,[4] Pawlowski and Larsen had disagreed with their supervisor’s on-the-job demands and decided to build their own mortgage business together. They took a chance on creating an online-based lending service, just as the Internet became ubiquitous.[4] At the time, E-Loan’s services included purchase and refinance mortgage loans, home equity loans, home equity lines of credit, and auto loans.

Growth

By mid-1997, the website, www.eloan.com, was launched. At the time it was the pioneer in online mortgage lending, with a Radically Simple value proposition at the time.[4]

In 1998, declining interest rates boosted mortgage originations to $1.5 billion, a 70% increase. Online loans increased only by $4.2 billion.[4] However, at the time, E-Loan controlled 25% of the online lending market, making it the number-one online mortgage business in the world.[1] E-Loan received $25.4 million in venture capital funding from Sequoia Capital, Yahoo Inc., and Softbank Holdings Inc.[5]

Yahoo Investment

By August 1998, E-Loan needed a capital injection to secure growth. The online lender was burning through $250,000 per month as it tried to retain 150 employees. The founders met with Intuit Corp, which offered $130 million to acquire E-Loan. The deal would net Pawlowski and Larsen $10 million each and give them $16 million in Intuit stock. However, as part of the acquisition, E-Loan shifted from an autonomous company to having a board of trustees in charge of the decision making.[1]

In August 1998, Pawlowski approached Yahoo and negotiated to sell 23% of E-Loan for $25 million. Though the offer was substantially less profitable than the Intuit deal, it effectively maintained E-Loan’s autonomy. It also made E-Loan Yahoo’s preferred mortgage site.[1]

Recovery & Development

In 2002, E-Loan established its headquarters in Pleasanton, California. It also created the E-loan Auto Fund One, a qualified special purpose entity that purchased prime auto loans from E-Loan and then held them. For this entity, E-Loan secured a $540 auto loan credit facility with Merrill Lynch.[6] During this time, E-Loan’s revenues from sales consisted of discounted cash flows, net of interest, service fees, and credit losses.[7]

E-Loan started using proprietary and commercially available licensed technology from fintech providers like Sun Microsystems, Cisco Systems, and Oracle. E-Loan also began using automated credit filters and proprietary underwriting engine to lower the cost of the loan origination process. The use of licensed technology effectively helped bolster E-Loan’s growth and reputation within the mortgage lending industry.[8]

In 2003, E-Loan formed Escrow Closing Services, Inc., a wholly owned subsidiary that provides mortgage closing services such as documentation preparation and signing, disbursement, and recording services.[9] In 2004, E-Loan originated more than $5 billion in mortgage loans. Most of those loans were fixed rate, and 70% were lines of credit. By the end of 2004, it employed 930 employees, had $121 million in assets, and $86 million in stockholder’s equity. It generated $135 million in annual revenue, and $822,000 in net income.[10]

As of 2004, 17% of the company’s shares were owned by insiders. The largest shareholder, at 5.05%, was Christian Larsen, following by Harold Bonnikson at 1.28% and Matthew J. Roberts at .85%. In 2004, 38% of the company was owned by institutional holders.[10] The largest institutional shareholders were Second Curve Capital at 7.77%, Wells Fargo & Co. at 5.11%, American Century Investment Mgmt at 2.11%, Rice, Hall, James, & Associates at 1.82%, and Gruber & McBaine Capital Management at 1.63%.[11]

In August 2005, the Puerto Rico-based commercial bank, Banco Popular, acquired E-Loan for $300 million.[11] Banco Popular’s parent company, Popular Inc., known for being the largest financial institution in Puerto Rico had $46 billion in assets, more than 135 branches in the U.S., and more than 280 branches in Puerto Rico at the time it purchased E-Loan.[11][12]

The goal of the acquisition was to increase E-Loan’s access to financial holdings, and therefore, its loan production capacity. With this increased lending capacity, both Popular and E-Loan sought to capitalize on a cost advantage through economies of scale.[11]

In October 2008, E-Loan's parent company, Popular, Inc. said E-Loan would no longer operate as a direct mortgage lender in 2009, but would continue to provide certificates of deposit and savings accounts.[13] Operational, general and administrative support functions would be transferred to other Popular subsidiaries.[1][14] The company subsequently moved its headquarters in 2009 from Pleasanton, California to Rosemont, Illinois.

Company officials said customers who have already obtained loans through E-Loan would not be affected as they were transitioned to another subsidiary of Popular.[14]

Development After the Acquisition

In May 2017, E-Loan deposit products transitioned to Popular Direct products. Both E-Loan and Popular Direct are owned and operated by Banco Popular North America.[12]

Awards

Since its inception, E-Loan has garnered various awards for privacy and ease-of-use:

gollark: I use a similar autoupdate strategy for most of my projects anyway.
gollark: I didn't expect it to be much faster, but cool I guess.
gollark: Also, you don't need the `if h then` bit, because it'll just return early if `h` doesn't exist, see?
gollark: If you're okay with hardcoding the time/date you're waiting for, you can generate the Unix timestamp for it with another thing and just get the difference between that and `os.epoch "utc"`.
gollark: It needs to be pastebin.com/**raw**/whatever.

References
  1. "Should she keep the baby". Forbes Magazine. 1999.
  2. "E-Loan to Stop Direct Mortgage Lending but Will Maintain Loan Portal/Referral Business". Finovate.com. October 2008.
  3. The Guru Guide to Entrepreneurship: A Concise Guide to the Best Ideas. 1998.
  4. CIO: Web Business Section. October 1999. p. 128.
  5. "E-loan gets second round of funding".
  6. "E-Loan, Inc. Secures $540 Million Auto Loan Credit Facility With Merrill Lynch". June 2002.
  7. "Eloan, Inc SEC Filings" (PDF). June 30, 2002.
  8. "Eloan, Inc. 10-K SEC Filing". April 1, 2002.
  9. "Escrow Closing Services". 2003. Archived from the original on 2018-01-04.
  10. "E-loan, Inc. Reports Fourth Quarter and Annual Results for 2004". February 2005.
  11. "Banco Popular Parent to Buy E-Loan for $300M". August 2005.
  12. "Popular, Inc. and E-LOAN, Inc. Announce Anticipated Closing of Merger". 2006.
  13. "Popular, Inc. 2008 Annual Report".
  14. "Popular Direct, Eloan".

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