12 Questions to Discover LendingHome

We recently had the opportunity to interview, LendingHome, a real estate marketplace originator. Learn more about how investors can diversify their portfolio with fractional notes investing in real estate.

LendingRobot: How would you describe LendingHome in one sentence?
LendingHome: LendingHome is reimagining the mortgage market by building a seamless, transparent marketplace that brings together real estate professionals looking for short-term mortgages and investors looking for institutional-quality investments.

LendingRobot: Where did the idea come from? What was the impetus?
LendingHome: The mortgage market is the last untouched frontier for the FinTech space, and it is still rife with inefficiency. Uncertainty for the customer characterizes the front end, while on the back there are stacks of paperwork and 10 times the data and documentation of any other transaction. That’s all primarily handled by humans today. Although there are more than 7,000 mortgage companies in the U.S., only a few have made any strides in technology. LendingHome was created to build a better way to get a mortgage.

LendingRobot: What makes you unique from others in your space?
LendingHome: LendingHome’s initial investors were some of the largest credit funds in the world, meaning that our credit policy had to meet institutional standards from day one. We continue to have a strong institutional investor base and opened up investing to individuals in early 2016. Our individual investors benefit from the same strong returns and quality as our institutional investors. We’re also now the fastest growing mortgage marketplace in the country—we are both sourcing and vetting a large volume of high-quality opportunities.

LendingRobot: Who is your typical investor?
LendingHome: We serve accredited investors looking for strong returns, short durations, and the the diversification benefits that come from adding real estate debt to their portfolios. Our investors come from a variety of backgrounds and industries—some are deeply knowledgeable about the real estate market, while for others this is their first investment related to real estate.

LendingRobot: How do your investors choose their investing strategy?
LendingHome: Investors can use our AutoInvest feature, which automatically builds a portfolio of real estate investments for them based on their chosen level of risk and return. Or, they can hand-select their own individual investments by browsing through all of the notes that we have available on our Investor Platform. Either way, individual investments start at \$5,000.

LendingRobot: How does your investment fit into an investor’s portfolio?
LendingHome: LendingHome’s fractional notes allow investors to diversify their portfolio from stocks and bonds by adding in real estate investments. We also allow for a measure of diversification even within the real estate asset class, since investors can buy into numerous notes on LendingHome’s platform in many different geographic areas—we currently lend in 23 states. We offer strong returns that average more than 9% and short durations that average around 9 months.

LendingRobot: What is a typical loan like on LendingHome?
LendingHome: LendingHome offers loans to real estate professionals who buy, refurbish, and resell properties. This is often referred to as the “fix and flip” market. These borrowers buy a property and finance a portion of the purchase price along with the cost of the renovations through LendingHome. They then renovate the property and sell it to buyers who want a move-in ready home. The duration of the loans is 1 year or less. Interest rates generally range from 7% to 12%.

LendingRobot: Could you describe your risk assessment and credit model?
LendingHome: We have an experienced Risk team that uses extensive amounts of data to determine the risk of each loan. Our interest rates are based on a risk-based pricing matrix that takes into consideration things such as loan-to-value ratio, the borrower’s past experience flipping houses, credit scores, and a personal guarantee.

We also carefully assess the risk/return profiles on housing markets throughout the country. So far, we have experienced a total principal loss of just 1 basis point of our total portfolio.

LendingRobot: What are three milestone numbers for LendingHome?
LendingHome: We recently reached \$1 billion in originations, which was a great milestone for us because it came just two and a half years after we started originating loans. We grew revenue over 2.5x in the past year, and we’ve returned over \$410 million in principal and \$35 million in interest to our investors so far.

LendingRobot: What are the goals you can share for the next year?
LendingHome: Some of the things we’re looking forward to in 2017 include on-boarding our first international investors onto the platform, lowering the per-note investment minimum (which currently sits at \$5,000) to improve portfolio diversification and launching a 30-year consumer mortgage product.

LendingRobot: What is your greatest challenge?
LendingHome: Our greatest challenge is the complexity of our space. There’s no question that innovating in mortgage is difficult. It is operational, data-heavy, regulated, and capital-intensive. We truly believe that by combining an experienced team and innovative technology, we can make great changes that benefit both borrowers and investors.

LendingRobot: If you had one wish for your niche in the alternative lending space, what would it be?
LendingHome: To continue attracting talented, driven people who are determined to make positive changes to our financial system.

LendingHome has several innovative products for 2017. We look forward to their continued growth and hope you enjoyed this interview.