Mak­ing Mar­kets

Matt Humphrey is one of the en­trepreneurs aim­ing to up­end mort­gage fi­nance with tac­tics bor­rowed from fin­tech, mar­ket­place lend­ing and the tra­di­tional mort­gage play­book

National Mortgage News - - Contents - by bon­nie sin­nock

Matt Humphrey is one of the en­trepreneurs aim­ing to up­end mort­gage fi­nance with tac­tics bor­rowed from fin­tech, mar­ket­place lend­ing and the tra­di­tional mort­gage play­book

Mar­ket­place lend­ing is, in many re­spects, an evo­lu­tion of the pri­vately funded mort­gage mar­ket, which has co-ex­isted with main­stream lenders with­out pos­ing much threat for years. Pri­vate-money lenders make the loans that tra­di­tional mort­gage lenders can’t, or don’t want to, make. Prod­ucts like com­mer­cial mortgages and fix-and-flip sin­gle-fam­ily home fi­nanc­ing of­fer higher re­turns than vanilla res­i­den­tial loans, but they re­quire a level of hands-on un­der­writ­ing and lo­cal mar­ket ex­per­tise that in­hibits scale.

But mar­ket­place lend­ing has changed that. Tech­nol­ogy used by mar­ket­place lenders of­fers deeper in­sights and trans­parency into trans­ac­tions, while more eas­ily con­nect­ing in­vestors and bor­row­ers in dis­parate lo­ca­tions.

And now, some of th­ese same lenders have their sights set on dis­rupt­ing the main­stream mort­gage mar­ket with tac­tics bor­rowed from fin­tech, mar­ket­place lend­ing and the tra­di­tional mort­gage play­book.

Take Lend­ingHome and its CEO, Matt Humphrey. The San Fran­cisco firm is a sin­gle-fam­ily bridge loan spe­cial­ist that funds it­self both through tra­di­tional sources of fi­nanc­ing and mar­ket­place lend­ing and was re­cently ap­proved to sell mortgages to Fan­nie Mae.

Lend­ingHome has raised $110 mil­lion in venture cap­i­tal since it was founded in 2013 and is look­ing for more. It’s done six bridge-loan secu- ri­ti­za­tions to­tal­ing $183 mil­lion and has a mar­ket­place lend­ing ve­hi­cle where ac­cred­ited in­vestors can pur­chase frac­tional in­ter­ests in loans.

Ear­lier this year, the com­pany es­tab­lished a reg­is­tered in­vest­ment ad­vi­sor called LH Cap­i­tal Man­age­ment and be­gan set­ting up two in­vest­ment ve­hi­cles un­der the name Lend­ingHome Op­por­tu­nity Fund II. The par­al­lel funds will ex­tend up to $200 mil­lion in to­tal fund­ing, ac­cord­ing to reg­u­la­tory fil­ings.

Like­wise, fin­tech lender SoFi, which self-funds its loans, is ap­ply­ing for fed­eral de­posit in­sur­ance, and was the first lender to test a re­cent Fan­nie Mae home loan prod­uct for bor­row­ers with stu­dent debt.

This sug­gests that the legacy of fin­tech and mar­ket­place lenders will not be de­fined by draw­ing lines be­tween this new breed of lenders and main­stream in­cum­bents, but rather by how those lines are blurred.

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