E-Loan

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.

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]

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]

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 million 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]

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]

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

• Web Marketing Association's Web Awards Financial Services Standard of Excellence Award (2013)
• New Media Awards Standard of Excellence Award (2013)
• Interactive Media Award’s (IMA) Best In Class in the Banking Category (October 2013)
• Top Financial Company for Privacy by TRUSTe and the Ponemon Institute (April 2007)
• Ranked #3 in Privacy by The Customer Respect Group (August 2005) E-Loan was the only financial services company and the highest ranking online company to make the top ten.
• Safest Places On the Web. Computer World

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