Category Archives: Lending

Fintech lender Prosper enters mortgage arena with eyes on HELOC disruption

Fintech lender Prosper, a longtime player in the personal lending space, has set its sights on the home equity sector, announcing plans Wednesday to enter the mortgage arena with the release a digital HELOC product in early 2019.

The San Francisco-based company connects investors with consumers on its online platform, helping borrowers secure fixed-rate, fixed-term personal loans.

Since it launched in 2005, it has originated more than $13 billion in personal loans for more than one million customers.

But the lender hasn’t been without its struggles.

Like other fintech startups in the lending world, Prosper appeals to Millennial borrowers with its speedy, digital loan process, making access to student and personal loans quick and easy.

But the company has struggled to get out of the shadow of its biggest competitor, Lending Club, a leader in the personal loan category that was rocked by scandal in 2016.

Prosper also had trouble drumming up the investor cash that was the foundation of its peer-to-peer lending model. To solve the problem, it offered investors company shares in proportion to the loans they agreed to back, and the result led to a rough net loss of $115 million in 2017 and a steep 70% plunge in the company’s value.

But 2018 is looking up for Prosper.

In Q2, it saw originations increase 12% year-over-year as personal lending spiked, becoming the fastest-growing category in consumer lending thanks in part to a major push from fintech companies.

Now, the lender is eyeing another sector in the lending world that it predicts will see major growth: home equity lines of credit.

The company announced Wednesday that it plans to launch a HELOC product in early 2019 that will revolutionize these transactions by drastically reducing the time from application to close.

Through Prosper’s platform, customers can digitally apply for a HELOC within minutes and receive an instant pre-qualification offer, shaving weeks off the process, according to the lender.

Banks that partner with Prosper will gain access to its customer base, technology and marketing expertise, the lender said.

In a release, Prosper said it expects HELOC lending to surge as home values rise, and more homeowners will turn to this loan to access credit.

“We are taking advantage of our expertise in consumer credit and personal loans to build a product that removes the complexity and time-consuming barriers in applying for a HELOC,” said Prosper CEO David Kimball. “For many of our customers, a HELOC could be a better choice for their financial needs and we’re thrilled to be working with our bank partners to render the traditional process obsolete with a new digital HELOC process that is simple, fast and painless.”

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Redfin partners with Notarize to enable completely online mortgage experience

Redfin has taken the final step toward providing its clients with a fully digital home buying experience. The listings giant’s mortgage arm has announced a partnership with Notarize in a deal that offers Redfin Mortgage clients the ability to close on a home quickly, easily – and completely online.

Redfin dove into the mortgage space last year, stating its ultimate goal to provide customers with an “entirely digital process.”

It spent 2018 opening branches across the country, expanding its reach to 10 markets and promising to bring customers low-rate mortgages with speed and convenience.

It’s partnership with Notarize is making good on that promise.

A 2018 HW Tech100 winner, Notarize is a digital platform offering legal, online document notarization.

A trailblazer in the online notary and eClosing space, Notarize raised $20 million in May with help from housing giants Lennar and Realogy, which both use its services. The company said it has grown more than 50% each month since it launched last year.

“Our closing solution is a natural fit for Redfin because their customers are accustomed to a digital, mobile product,” said Notarize Founder and CEO Pat Kinsel. “Our technology integrates to seamlessly to deliver an easy, intuitive experience, so that buyers can get on to moving and unpacking boxes in their new home.”

Redfin Mortgage said it completed its first fully digital home closing earlier this month for a homebuyer in Texas, and plans to close more mortgages digitally as homebuyers learn about the option.

“Redfin is using technology to improve the entire home buying process from initial home search, to mortgage application and approval, to purchasing and now closing on a home purchase,” said Jason Bateman, head of Redfin Mortgage. “For homebuyers, this means you can choose the time and place to sign your documents, whether that’s from the comfort of your couch or on your phone in the moving truck outside your new home.”

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Zillow’s move into seller leads called "billion-dollar opportunity"

Last week Zillow reported earnings and the stock immediately tanked.

Consensus is that revenue growth from its premier agent program is slowing down, and since that represents nearly 75% of the online listing service’s business, investors became skittish.

However, one real estate tech adviser is declaring that those investors are missing the bigger picture in that Zillow is sitting on a goldmine with its latest ventures.

In an email to subscribers, independent analyst Mike DelPrete said Zillow’s strategic shift into iBuying and mortgage lending points to a much more profitable business line. In fact, DelPrete said this shift to focus on seller leads is a “billion-dollar opportunity.”

“Zillow’s iBuyer business continues to grow, and the latest results crystalize the opportunity in seller leads,” he writes in the email. “Zillow says that since launch, nearly 20,000 homeowners have taken direct action on its platform to sell their home. Of those, it has purchased just about 1% of homes (around 200). That leaves about 19,800 leads who remain interested in selling their homes.”

Zillow could then sell that info to agents on a per-lead basis, or give the leads to premier agents in exchange for a referral fee. But, DelPrete notes this is just the beginning of what Zillow can do.

DelPrete breaks it down:

“Given the value of the seller leads, should Zillow even be in the business of buying houses? Yes, if it wants a credible product for consumers. The real question is: What proportion of houses should Zillow actually buy?

Zillow’s “big picture” is 5 percent national market share, which equates to buying around 10 percent of all offer requests (it is currently buying around 1 percent of offer requests). At a 1.5 percent net margin, that’s around $1 billion in profit.

But to reach that scale, Zillow would need to spend $68 billion to purchase 275,000 houses annually. Assuming an average holding time of 90 days, it would need a credit line of $17 billion to fund the effort. Big numbers.”

Note: DelPrete is the author of online analysis service, Adventures in Real Estate Tech.

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