How P2P lending could help finance tough mortgages

by Kendall Greenwood17 Dec 2014


Savitt said it is vital for mortgage professionals using P2P lenders to seek council and check that they are compliant. Specifically for companies financing residential mortgages, get the acceptance of the CFPB in writing.
Nonetheless, the 14% mortgage loan denial rate reported by the Urban Institute shows there are borrowers to be reached here.

“We see a real opportunity to partner with mortgage brokers to help them get financing at reasonable terms and to help their clients get better terms,” Vetter said.

For borrowers, this model has the potential to decrease the possibility of being denied. “These days there are a lot of people who can’t get loans from banks,” Vetter said. “So that’s where we come in.”

Peer-to-peer lending platforms have had an annual growth from 2008 to 2013 of 176.6% according to IBISWorld. Their revenue is expected to rise 79.8% by 2018.

Due to market popularity, ­SoFi is even planning to launch a mobile-phone app to attract urban millennials, who have been “priced out” of the mortgage market for some time. The app will increase possible borrower unconditional commitments to up to $1.8 million, without an up-front physical appraisal.

To apply using the app, applicants will be able to submit pictures of their pay stubs. Each applicant’s cash flow will be authenticated through photographic confirmation.  

Money360, one of the first marketplace lenders to focus solely on commercial lending, has originated $13 million in loans from September of this year to now. By the end of 2015 they expect to have $200 million in loan originations.

The company was incorporated in 2010. However, at that time securities regulations would not allow Money360 to advertise on the Internet specific loans (considered securities by the Securities and Exchange Commission) to potential investors.

“That’s really what makes this model workable,” Vetter said.

So, CEO and Founder Evan Gentry decided to put the idea on hold until regulations caught up. In September of 2013, they did.

Title II of the Jobs Act took effect, allowing companies to advertise investing and lending opportunities through the web.

In September of this year, Money360 announced the re-launching of their platform.
 

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