Articles by deBanked Staff
Why this Real Estate Lender is Going Long
March 15, 2016
Patch of Land, an online lender for real estate loans added a mid-term loan option for 2-5 years starting at 6 percent.
The LA-based lender issued loans starting at 10 percent for up to two years. The company uses a data-driven underwriting model and promises investors a risk adjusted return with extensive available data to support the underlying credit decision on each loan.
Patch of Land provides loans ranging from $100,000 to $5 million and prides itself on providing quick loans. These short term loans are called ‘bridge loans’ and as the name suggests are a bridge until the borrower secures permanent capital. The company on its website noted, “Although this type of financing has relatively high interest rates, it allows the user to meet current obligations because it provides immediate cash flow.”
Should this be considered in the larger context of the commercial real estate environment, it aligns with the general attitude of caution among lenders towards big projects. CNBC quoted real estate firm CBRE and said that it “conservatively” estimates that 18 percent of loans this year and 29 percent of loans next year to have refinancing problems as investors move away from commercial real estate bonds. CBRE estimates $43 billion to be in “troubled loans” over the next two years.
Should other lenders pay attention?
Square Buys Analytics Startup for Its Merchant Cash Advance Team
March 14, 2016Square has acquired analytics startup Framed Data to better target customers for Square Capital.
The startup mined data using machine learning to predict user behavior and purchasing decisions. Founded by data scientists in 2013, Framed Data will help Square use analytics to provide more capital to more merchants.
Square Capital is a big business for the company. It funded over $400 million in 70,000 merchant cash advances last year. The company’s first earnings report last week showed that it is beginning to bring bigger merchants into its customer base. The majority of Square’s point of sale customers are micromerchants, a fragmented market of low volume businesses.
It’s a crucial time for the company to prove to investors that it can grow beyond point of sale solutions for payments and Square Capital will play a major role in that.
Why did HomeAdvisor Choose Prosper over Lending Club?
March 14, 2016
Home services marketplace HomeAdvisor partnered with Prosper Loans exclusively to provide home improvement loans to its users under a multi-year contract.
Formerly known as ServiceMagic, HomeAdvisor lists service professionals, resources and tools for home improvement and maintenance and claimed to have connected 35 million home owners to service professionals and so branching out to offer loans on the platform was a logical business move. But, Prosper was not its first ally. Last year in March the Golden, Colorado-based company announced Lending Club as its exclusive lending partner, again under a multi-year agreement.
Did the deal go sour? Maybe. Is Prosper a better partner?
Home improvement loans have been a big cash cow for Prosper. As of 2014, approximately 8 percent of their borrowers said their loan was for home improvement. Orchard, in its analysis states that these loans may in part be a substitute for traditional home equity lines of credit, which used to be easier to obtain prior to the housing crash.
HomeAdvisor struck similar deals with both the lenders. Lending Club offers interest rates for fixed monthly payments starting at 3.99 percent (4.99 percent APR) and Prosper personal loans are priced between 5.99 percent to 36 percent.
“We stopped working with Lending Club solely because we started working with Prosper. We chose to work with Prosper because they’re a better fit for our business at this time,” said a Prosper spokesperson, commenting on the deal.
Are there more dots to be connected?
Analytics Startup Gets $5 Million in Seed Round from Soros, Jefferies
March 14, 2016
Another day, another fintech round.
George Soros-led Soros Fund Management and Jefferies Group invested $5 million in portfolio management and loan analytics platform, DV01 a New York-based startup that was founded in 2014 by Perry Rahbar, a former JP Morgan mortgage bond trader.
The platform advises investors on which loans to refinance through marketplace lenders like Prosper and Lending Club. Bloomberg reported that Soros had committed $2 million to the company in a separate round of financing.
As the marketplace for loans grows, so does the market to judge those marketplaces. Today, there are over a dozen startups working in big data analytics providing a wide net of services like forex trading portals, digital advisory platforms and social network for investors.
Specifically speaking of credit risk analytics, last year, PeerIQ secured $6 million in total funding from Morgan Stanley CEO John Mack and former Citigroup chief Vikram Pandit. But that is only a fraction of venture capital dollars. As far as funding goes, lenders are still the cream of the fintech crop where American fintech companies raised $7 billion over 351 venture capital-backed deals in 2015 with SoFi, Zenefits, Avant and Prosper Loans as frontrunners. This trend is likely to continue in the context of the recent IPOs in the industry. The noteworthy fintech IPOs like OnDeck, Lending Club and Square debuted with a bang but are struggling to find ground.
SoFi, Prosper Investor Bets on UK Online Lender
March 14, 2016Capital One-backed QED investors is putting more money where their money is — in online lending. After taking bets on Prosper Loans and SoFi, the venture capital firm crossed the pond to invest in UK-based student loans lender Future Finance.
The Dublin-based company raised $171 million from marquee investors like Blackstone Group and QED investors in addition to the existing credit facility with Goldman Sachs and will use $100 million towards selling more loans. The two-year old online lender has received over 37,000 applications to date since 2014.
The injection “will enable many more students in the U.K. to access higher education and invest in their future careers,” Chief Executive Officer Brian Norton said, according to Bloomberg. In a video interview, Norton pointed out that the affordable government loans, although great, aren’t enough.
And this may have come at an opportune time when the UK government said last month that it will continue to provide considerable subsidies for higher education including underwriting student loans, on one hand and making it a criminal offense to default on student loans on the other.
You Can Ask Alexa to Pay Your Credit Card Bill – Will Loans Be Next?
March 11, 2016
Very soon, you will be able to pay your bills just a second after you turn on that thermostat.
Capital One and Amazon want to give Alexa, the “skill” to become your personal teller and allow the home automation device to pay your bills, check balances and review transactions.
Starting next week, Capital One customers will be able to use the app through Alexa and instruct the digital assistant.
“Alexa, ask Capital One for recent transactions on my checking account”
“Alexa, ask Capital One for my Quicksilver Card balance.”
“Alexa, ask Capital One to pay my credit card bill.”
Of course, security concerns will remain key as Internet Of Things slowly finds a way into people’s homes. But for now, Alexa can take care of that outstanding cellphone bill.
If the feature catches on, it will only be a matter of time before loans become a thing you can wish for out loud and have Alexa make a reality.
CFPB Director To Testify Before House Financial Services Committee
March 11, 2016
CFPB director Richard Cordray will appear before the House Financial Commitee to address reports decrying the bureau’s activities.
The committee issued two reports detailing the bureau’s attempt to regulate auto dealers despite being prohibited to do so. The reports also exposed the CFPB’s flawed distribution of a $80 million settlement without doing a due diligence on the claimants leading in alleged racial discrimination. The documents revealed, some white borrowers received settlement checks over Asians, African-Americans and Hispanics.
“The CFPB undoubtedly remains the single most powerful and least accountable Federal agency in all of Washington,” said Chairman of the committee Jeb Hensarling (R-TX). “When it comes to the credit cards, auto loans and mortgages of hardworking taxpayers, the CFPB has unbridled, discretionary power not only to make those less available and more expensive, but to absolutely take them away.”
Since Cordray’s last appearance before in September 2015, the Bureau has has proposed regulations that compromise on the consumer’s’ right to access small dollar, short-term loans. The Qualified Mortgage rule that addresses few of the actual risks associated with mortgage lending led some community financial institutions to downsize or shut down their mortgage operations.
Prosper Rebrands BillGuard as Prosper Daily
March 10, 2016Marketplace Lender, Prosper Loans relaunched expenses tracking app BillGuard under its own brand as Prosper Daily.
The P2P lender acquired BillGuard, a personal finance management app for $30 million in September 2015. Relaunched as Prosper Daily, the app lets users view financial accounts, budget, spend and monitor credit scores.
Prosper started as a marketplace in 2005 for personal loans ranging from $2,000 to $35,000. This is the San Francisco-based company’s attempt at evolving as a personal finance company. “We’re excited to be the first marketplace lender to offer a financial wellness app to consumers,” said Prosper CEO Aaron Vemut.
