LendingHome offers investor mortgages at steep rates

The San Jose residence had housed hoarders, its rooms crammed floor to ceiling with junk.

“It was in horrible condition, which is the way we like ’em,” said Jon Condrey, a house flipper. When Condrey bought the California rancher for $620,000 about 10 weeks ago, he used a new Internet marketplace called LendingHome.com to secure a $496,000 mortgage. He paid a steep interest rate: 10 percent.

But Condrey considered that decent for “hard money lending,” short-term loans where the value of the collateral outranks the borrower’s ability to repay. Condrey got the loan within days of filling out an online questionnaire and having his information verified. He’s now applying for LendingHome mortgages for two more fix-and-flip houses.

“Time is the enemy in our business,” said Condrey, who’s hustling to get the San Jose house on the market this week for $799,000. “LendingHome can move very, very quickly to get things done. They’ve automated a lot of the process.”

San Francisco’s LendingHome, which has raised $109.3 million in venture backing, including a $70 million round this month, says setting up shop on the Internet will make issuing home loans simpler, faster and more transparent.

Its target population is investors who can’t get regular mortgages — and therefore it charges a premium. Right now it lends to only investors in single-family homes. LendingHome offers two options: fix-and-flip bridge loans at rates ranging from 7 to 17 percent for terms of six months or one year, or rental-property loans with rates ranging from 5 to 9 percent for 30-year fixed loans or 5/1 adjustable rate mortgages. Borrowers generally must put down 30 percent.

“If you qualify for a traditional bank loan, we recommend that,” said CEO and co-founder Matt Humphrey. “But there aren’t a lot of options for investment properties; it’s very challenging to get a loan. And there are a lot of folks who can’t qualify: Maybe they haven’t had the same job for two years, or they had a short sale six years ago. We think they should have access to the (mortgage) market.”

Humphrey said they are not the type of risky subprime loans that caused the mortgage meltdown. “Subprime was folks who should not have been extended credit,” he said. “That’s not the case. We make sure the rental properties can cash-flow” (meaning they bring in enough rent to cover mortgage, taxes, insurance and other expenses).

After a financial crisis, lending always tightens up, said Guy Cecala, publisher of Inside Mortgage Finance. “We’ve just gone through the biggest crisis in a lifetime, so underwriting is very tight right now,” he said. “It’s hard to get investor loans or loans for people who have credit issues, so there is an opportunity for private lenders to step in.” He named California’s Citadel Servicing Corp., which is lending around $100 million a month (12 times more than LendingHome), as a leading example. Citadel’s lending is called “non-prime” rather than “subprime.”

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