LendingHome, an online mortgage marketplace backed by more than $100 million in venture funding, launched a crowdfunding platform.
The move is bound to add to already intense competition in real estate crowdfunding, where dozens of startups are jostling for control of a small but growing market.
“Having a diversification of capital is always a good thing,” the LendingHome’s CEO Matt Humphrey told The Real Deal. The California-based firm issues one-year, first-lien mortgages on one-to-four family homes and passes them on to institutional investors. Expanding from institutions to individual investors, who can now buy notes tied to mortgages for as little as $5,000, expands the platform’s investor base, argued Humphrey.
LendingHome claims to have originated $550 million worth of mortgages since its 2013 launch, with $220 million returned to investors. Its average loan size is between $150,000 and $200,000, with a loan-to-value ratio of a little over 70 percent.
The firm’s new crowdfunding offering will compete with platforms like California-based Patch of Land, which also offers notes tied to first-lien mortgages to small-time investors.
While most crowdfunding platforms started out by targeting small-time individual investors and later branched out to institutions, LendingHome took the opposite approach. Humphrey argued that focusing on deep-pocketed institutions first allowed the firm to grow more quickly than its peers. “To get scale you need hundreds of millions in capital in the first few years,” he said. “And that can be hard.”
Last month, The Real Deal explored how smaller investors were being crowded out of the crowdfunding game by institutional funds.