E-Trade Group Inc., moving to diversify in order to weather the shaky stock market, said Thursday it will buy LoansDirect.com, a closely held online mortgage broker.
Although specific terms weren't disclosed, E-Trade said the transaction will involve an exchange of stock.
Huntington Beach-based LoansDirect, a major provider of online mortgages, will become part of E-Trade's bank subsidiary. With the deal, which is expected to be completed in about 30 days, E-Trade hopes to diversify beyond a dicey stock market that has cut into its brokerage commissions.
E-Trade rival Charles Schwab Corp. already owns a stake in another Web lender, ELoan Inc.
Investors greeted the deal enthusiastically. E-Trade's stock surged $2.09 a share, or nearly 21%, to $12.06, in Nasdaq trading.
LoansDirect, which does business in 48 states, funded $1.78 billion in mortgages last year, and expects to boost its output to $3 billion this year.
The company said it expects lower interest rates to trigger more refinancing. A couple of online lenders also have folded, including Mortgage.com, leaving fewer competitors.
The company said it expects its 280 employees, including managers, to be retained after the acquisition.
E-Trade said the purchase is expected to immediately boost its revenue and earnings.
"E-Trade will gain a high-performance company which has had solid revenue, positive earnings, technical expertise and an experienced management team," Mitchell Caplan, the firm's chief banking officer, said in a statement.
A year ago, E-Trade completed its $1.9-billion purchase of Telebanc Financial Corp., an online bank that has become E-Trade Bank. E-Trade Bank now has more than $5.7 billion in deposits.