Ending months of speculation about its future, mortgage lending giant DiTech Funding Corp. of Irvine said Monday that it agreed to be acquired by GMAC Mortgage Corp., a unit of General Motors Corp.
Terms were not disclosed.
DiTech, one of the Southland's largest mortgage lenders and an aggressive marketer of higher-risk home equity loans, shelved plans for an initial public stock offering last fall that it had hoped would raise about $110 million for a minority stake in the company. At that time, the resale market for its so-called sub-prime, or high-risk, loans had cooled dramatically.
The company began talking with GMAC, one of the largest buyers of its loans, about broadening their relationship in October.
The sale to GMAC "gives us all the capital we need to grow," said J. Paul Reddam, DiTech's chief executive and its TV pitchman, who would continue in those roles after the acquisition. "I think it gives us a lot of stability for good times and bad and allows us to be more aggressive in our lending practices."
Reddam said there will be no layoffs at the 700-employee company, which will become a subsidiary of GMAC, the mortgage finance subsidiary of GM.
DiTech will implement a host of already planned changes in the coming months, Reddam said, including a move to new and larger offices in Costa Mesa and a name change to DiTech.com, to reflect its increased presence on the Internet.
Customers who log on to the company's Web site can learn within minutes whether they've been approved for a loan, and do so without talking to a company representative.
Industry experts said the acquisition would be good for both companies. It would give DiTech access to GMAC's much deeper financial resources.
"It gives them a balance sheet partner among the largest corporations in the U.S. and puts them in excellent condition to continue the growth of their business," said Edward Carpenter, chairman of Carpenter & Co., an Irvine investment bank.
GMAC gains a steady flow of new loans to either service or sell.
"We believe DiTech's approach is complementary to GMAC Mortgage's wide variety of lending solutions," Mike O'Brien, president of GMAC Mortgage, said in a statement. He added that DiTech's aggressive advertising is unique and will bring GMAC's message to a wider audience.
Competitors said they are unsure what the deal would mean to the industry, but they said it would mean more business for DiTech.
"GMAC is the 600-pound gorilla," said Anthony Hsieh, president of Huntington Beach-based Tricor. "But one thing's for sure: They can't get all of the business."
The now 4-year-old DiTech has cut a wide swath through the Southland's lending industry, in part because of steady, frequent ads on cable TV and the Internet. The company also has billboards along Southern California freeways that flash a digital readout of current mortgage rates.
DiTech's loan volume hit $3.8 billion last year.
A company spokeswoman declined to disclose the size of the company's profit. In a Securities and Exchange Commission filing last year, DiTech said it earned $8 million on revenue of $32.8 million in 1997.
Since then, the resale market for sub-prime loans crumbled amid a global credit crunch and disarray in the mortgage market. Competitors such as Dallas-based FirstPlus Financial Group began laying off thousands of employees, including 1,300 in Orange County. FirstPlus filed for bankruptcy protection last month.