Type: Wholly Owned Subsidiary of IAC/InterActiveCorp
Address: 11115 Rushmore Drive, Charlotte, North Carolina, 28277, U.S.A.
Telephone: (704) 541-5351
Toll Free: (800) 555-8733
Fax: (704) 541-1824
Web: http://www.lendingtree.com
Employees: 850
Sales: $428.8 million (2006)
Incorporated: 1996 as Credit Source USA
NAIC: 812990 All Other Personal Services
SIC: 7299 Miscellaneous Personal Services Nec
LendingTree, LLC, is a Charlotte, North Carolina-based online lending and realty service exchange company. Users are able to complete a single online application for a mortgage, credit card, car loan, home equity loan, refinancing loan, personal loan, as well as access student loans and other commercial lending products. The company's services can also be accessed via a toll-free telephone number. Users then receive, at no cost, competing offers from a pool of about 200 lenders, including Bank of America, Chase, Citibank, PNC Bank, and Wachovia Mortgage Corporation, the company's true customers. LendingTree makes its money from fees related to the business that its sites generate for lenders. The company's family of brands also includes HomeLoanCenter.com, GetSmart.com, LendingTree Loans, and LendingTree Settlement Services, LLC.
Founder: An Aspiring Entrepreneur at an Early Age
LendingTree was the intellectual offspring of Douglas Robert Lebda. He was the son of Walter Robert Lebda, owner and president of Townecraft of Central Pennsylvania, marketer of cookware and china, as well as a real estate investor. The younger Lebda demonstrated an interest in business at a young age, retrieving golf balls with friends at night from a water hazard at Bucknell Golf Club, where he also caddied; during the daytime he would sell the balls at a discount to players, who in many cases promptly deposited them back in the water, where they waited once again to be fished out by the enterprising young man. As a high school student he also worked for his father during summers, hawking pots and pans over the telephone. Like his father, Lebda enrolled at Bucknell University in Lewisburg, graduating in 1992 with a degree in business administration. He then went to work for PricewaterhouseCoopers in Pittsburgh.
Frustration Leads to Inspiration for LendingTree
After being joined by his girlfriend, Tara Garrity, a 1994 Bucknell graduate, Lebda attempted in 1995 to arrange a mortgage for a $60,000 condominium, a task that he assumed he could easily accomplish given his financial acumen. "Back when I was with Pricewaterhouse," Lebda recalled in a 2000 interview with Business North Carolina, "I was one of the first experts on derivatives. There I was, 24 years old, sought after to speak at industry conferences all over the country." Finding the best loan terms on a mortgage, however, proved more difficult than he had assumed, involving countless phone calls and taking three months to complete. Adding insult to it all, his lender, who had been delaying the process for weeks, at the 11th hour demanded that Lebda buy flood insurance. The condominium was located on Pittsburgh's Mount Washington, several hundred feet above the three rivers that intersected the city, making a nuclear holocaust a more likely problem than flood damage to the property.
If he was having problems arranging a mortgage, Lebda realized that the average person must have viewed the process as an utter nightmare. This insight inspired him to take advantage of the Internet to create a loan marketplace where instead of borrowers being at the mercy of lenders, the tables would be turned and the lenders would be forced to bid for borrowers. The service would operate like the trading market: "Essentially put out a request that says 'Here's what I'm looking to buy' and multiple players bid on that and I can use the best product that works for me," Lebda explained to Mortgage Banking in 2000.
In early 1996 Lebda contacted a Bucknell fraternity brother, James Bennett, Jr., about going into business together. Bennett had enjoyed success with a start-up Internet venture: In 1994 he launched BookWire, a business-to-business book publishing portal he had just sold to Cahners Publishing Co. In March 1996 Lebda and Bennett wrote checks for $1,500 and established their Internet-based loan referral service under the name Credit Source USA. The operation was little more than Lebda's apartment and a Mail Boxes Etc. address.
By this point, Lebda had been accepted to the M.B.A. program at the University of Virginia Darden School of Business. He resigned from Pricewaterhouse and during the three-month period before entering graduate school he tried to sign up banks to participate with Credit Source USA. That fall, he and Garrity married and moved to Charlottesville, Virginia, where he attended classes in the morning while she researched potential customers in the business library, and in the afternoons he worked on Credit Source as well. He also ironed out the business model at school, pitching the concept to classmates in a competition for new business ideas. Lebda lost out to a student who wanted to open a new nightclub in Charlottesville.
After a year of effort, Lebda was starting to field interest from investors and potential customers, in particular National City Bank of Cleveland, and decided to forgo his second year of business school. He and Garrity looked for a city to serve as the company's home office, determined to avoid Silicon Valley. A weekend trip to Charlotte, North Carolina, was enough to convince them to move there. Not only did the area offer a pool of well-educated white-collar workers, it was home to Bank of America and First Union Bank, and in nearby Winston-Salem, Wachovia Bank maintained its headquarters.
LendingTree Goes Live: 1998
By the fall of 1997 Lebda was able to raise $1 million in seed money and launched the Credit Source USA web site. In November 1997 he hired the company's fifth employee, Chief Technology Officer Rick Stiegler, a former Morgan Stanley vice-president, who revamped the architecture of the site and led to Credit Source USA being rebranded and incorporated as LendingTree in 1998. On July 1, 1998, LendingTree.com went online. Serving as CEO and chairman was chief financial backer Robert G. Wilson, a former Goldman Sachs partner who would hold these posts for the next year. By this time Bennett also joined the company full-time, serving as senior vice-president of strategy and corporate development, as did Tara Garrity Lebda, who headed lender relations until leaving to raise a family in June 2000 (also citing burnout as a reason for her departure).
LendingTree began operations in 1998 with only a handful of lenders and offered just five loan products. At the end of the year the company posted revenues of $409,000. The online lending field was already crowded by this point but LendingTree was able to gain credibility in the marketplace by selling its Lend-X application service provider technology developed by Stiegler. The company realized that banks were a natural customer for LendingTree's technology infrastructure and Wachovia became the first customer, going live in March 1999. By the end of 2000 Lend-X would be private-labeled to more than 20 financial institutions, but it was the addition of Freddie Mac (Federal Home Loan and Mortgage Corporation) as a Lend-X user that solidified LendingTree's reputation as a player to be taken seriously.
Revenues increased to $7 million in 1999 and by the end of the year LendingTree's roster of lenders numbered 94 and included many leading regional and national banks. The company was also winning over investors. After raising $15 million in two previous financing rounds, in September 1999 the company completed a third round, raising $50 million from Capital Z Financial Services Fund II L.P.; G.E. Capital; the Goldman Sachs Group Inc.; Marsh & McLennan Capital; and Priceline.com. Lebda was soon on a fourth round of funding, setting his sights on another $15 million, but was asked what would it actually take to establish LendingTree as the dominant player in the market and to accelerate growth. After some consideration, he returned to investors, this time asking for $50 million while presenting a plan to take the company public. The company filed for its initial public offering (IPO) of stock on December 1, 1999, with Merrill Lynch serving as lead underwriter.
Taken Public: 2000
As LendingTree prepared for its IPO, it gained greater visibility by launching a new advertising campaign in January 2000, featuring the highly successful tagline, "When banks compete, you win!" Management then began its roadshow to convince investors that the company's marketplace business model differentiated it from competitors who were either lenders or referral sites. Given that the mortgage industry was in flux at the time, with the Commerce Department reporting a two-year low in new home sales, and companies generally lumped together with LendingTree, like E-Loan Inc. and Mortgage.com Inc., were seeing their stocks hammered, differentiation was clearly in order. LendingTree bolstered its case further when two weeks before the IPO was to be conducted it invested in LoanTrader Inc., a wholesale lending company that connected lenders and brokers. As a result, brokers were for the first time brought into the equation for LendingTree, a move that demonstrated to potential investors that LendingTree was not content to remain idle in a competitive landscape. When the IPO was completed in mid-February 2000, LendingTree netted $43.8 million.
LendingTree shares had been priced at $12 and quickly rose above $20 but in a matter of weeks dipped below $4 and settled around $6 as the stock market suffered through a difficult stretch and Internet-related stocks were hit especially hard. LendingTree had more than its share of critics, who maintained that it was on the verge of joining a multitude of other dot-com companies in the dustbin. Nevertheless, LendingTree hung on and continued to grow. In August 2000, with backing from Capital Z. Financial Services Fund, the company was able to make its first acquisition, buying the assets of HomeSpace Services Inc., an online real estate e-commerce company, for $12 million. The deal included a national network of 7,000 real estate agents as well as alliances with Delta Airlines and Costco Wholesale club, representing significant new lines of revenue.
LendingTree posted sales of $30.8 million in 2000. That amount more than doubled in 2001 to $64 million. Moreover, the number of loans closed increased by 160 percent to $12.1 billion, making LendingTree the top site for consumers seeking competitive loans. Over the course of the year 31 lenders were brought into the fold, increasing the number of participants to 145. Taking advantage of low interest rates and a refinancing boom, LendingTree saw revenues improve another 74 percent in 2002 to more than $111 million and for the first time in its history LendingTree recorded a profit on the year, netting $5 million, after losing $32 million the previous year. The company also laid the ground for even greater growth as it expanded LendingTree Realty Services Exchange, adding 2,500 new real estate agents during the year, leading to $1 billion worth of closed real estate transactions in 2002.
Acquisition by IAC: 2003
With its stock price soaring in 2003, LendingTree was rumored to be a highly attractive takeover target. Eager to be on a more secure financial footing, Lebda decided in 2003 to sell the company to USA Interactive (later renamed IAC/InterActiveCorp), headed by media baron Barry Diller who was assembling a collection of Internet-based businesses. The stock swap was valued as high as $734 million. Lebda and his management team stayed on and soon dipped into Diller's deep pockets to make acquisitions to expand LendingTree further. In 2003 RealEstate.com was acquired along with GetSmart.com. The latter had a similar business model and brought with it new customers and technology that LendingTree was able to incorporate into its own system.
More acquisitions followed in 2004. LendingTree picked up Domania.com, provider of customer acquisition and retention services to the banking, real estate, and mortgage industries. Online mortgage lender HomeLoanCenter.com was purchased, representing LendingTree's first venture in the direct lending business. In November 2004 LendingTree acquired iNest, a new-home builder referral network that was folded into RealEstate.com. The year 2004 was also marked by tragedy. In March, Rick Stiegler had died suddenly at the age of 47.
In 2005 Lebda left the company that he founded, tapped by Diller to become president of the parent company, IAC. Replacing him as LendingTree's CEO was the head of RealEstate.com, Tom Reddin. In Lebda's new role, he would also oversee other ventures, including Home Shopping Network, Ticketmaster, and Match.com. He left LendingTree as it was on its way to growing revenues 131 percent to $367.8 million in 2005. Revenues continued to grow in 2006, albeit at a slower rate, improving 17 percent to $428.8 million. LendingTree's services were used by 20 million customers, resulting in $152 billion in closed loan transactions.
The year 2007 was a time of flux for LendingTree, as it was indeed for the mortgage industry, hard hit by a slump in the housing market, high interest rates, and a deterioration in the number of mortgages issued. On the one hand, the company launched its High Yield Savings Account marketplace, on the other it had to contend with the departure of Reddin, who elected to leave the company for personal reasons in April 2007. A month later, LendingTree laid off one-fifth of its workforce, about 440 jobs, due to poor market conditions. LendingTree was soon able to fill the vacancy at the top post, naming C. D. Davies, a former Wachovia Corp. mortgage head, as its new CEO. More turmoil was in store for the company, however. A second round of layoffs ensued, and in mid-December a third round eliminated another 220 positions. Moreover, a month earlier IAC announced that it planned to spin off four companies to focus on its core web businesses. One of those businesses to be set free as a public company was LendingTree.
Principal Subsidiaries
LendingTree Loans; HomeLoanCenter.com; GetSmart.com; LendingTree Settlement Services, LLC.
Principal Competitors
Countrywide Financial Corporation; ditech.com; Wells Fargo Home Mortgage.
Further Reading
Bergquist, Erick, "LendingTree Has Survived--But Now Will It Prosper?" American Banker, May 10, 2001, p. 1.
Birger, Jon, "New Executive: Jamey Bennett," Crain's New York Business, June 29, 1998, p. 15.
Choe, Stan, "LendingTree to Be Sold," Charlotte Observer, May 6, 2003, p. 1A.
"Doug Lebda," Triangle Business Journal, June 23, 2000, p. 6A.
Downey, John, "Lending Tree Prepares to Branch Out," Business Journal Serving Charlotte and the Metropolitan Area, February 4, 2000, p. 3.
"Marketing Strategies: Web Loan Marketer to Launch Ad Campaign," Financial Net News, December 8, 1997.
Martin, Edward, "Nursery Stock," Business North Carolina, November 2000, p. 26.
Milligan, Jack, "A House-Hold Name," Mortgage Banking, May 2004, p. 22.
Rothacker, Rick, "Lending Site Lays Off 20% of Its Staff," Charlotte Observer, May 12, 2007, p. 1D.
------, "LendingTree Grafts First New Limb," Charlotte Observer, August 3, 2000, p. 1D.
------, "Spin Off Ahead for Loan Web Site," Charlotte Observer, November 6, 2007, p. 1D.
Sacirbey, Omar, "LendingTree's IPO Mantra: Stick to the Map," IPO Reporter, February 28, 2000.
Schiavone, Louis L., "LendingTree.com," Mortgage Banking, December 2000, p. 24.
— Ed Dinger
