Jason van den Brand had been working in the home mortgage industry for a decade when he realized he had the power to change it.
It was the middle of 2013, and he was working at a co-working space, alongside Elijah Murray, a user experience designer. At the time, van den Brand was complaining to Murray about how time consuming, expensive, and inconvenient the process of securing a home loan was for his clients. "So, I was griping about this to Elijah," van den Brand remembers, "and he's like: 'You know we can build stuff that automates all of that, right?'"
And so they did. In October of that year, van den Brand and Murray launched Lenda, an online platform that lets people refinance a home loan completely online. By automating this process, van den Brand says, Lenda can cut out traditional brokers who charge hefty commissions and steep margins, and instead offer people cheaper, quicker loans. On Thursday, the company announced it has closed $25 million in loans to date and will be expanding beyond its initial test market in California to Washington state.
Lenda's success in the home mortgage lending industry follows a swell of activity in the alternative finance space. In recent years, companies like Lending Club, Prosper, and OnDeck Capital have become viable alternatives to bank loans both for individuals and small businesses. Meanwhile, businesses like Wealthfront and Betterment have succeeded in bringing the costly process of investment management online, offering clients drastically lower fees than traditional money managers charge. With Lenda, van den Brand is extending this idea to the world of home financing.
"We knew it was coming. Millennials are growing up. They're buying homes," he says. "We thought: 'We can either wait for it to happen, or we can do it ourselves.'"
On Lenda, homeowners start by entering basic information about themselves, including their credit scores, current mortgage, and estimated value of their homes. Lenda's algorithms then automatically determine which loans that homeowner would likely be approved for.
Users can upload their bank documents right on the site and e-sign their applications, so they can avoid the mountains of paperwork that traditionally dominate the industry. And while it still takes about 25 days to close a loan with Lenda (there's no getting around the basic regulations), van den Brand says that's much shorter than the industry standard.
He also says that, unlike most of Lenda's competitors, Lenda isn't a lead generator, so it doesn't just hand potential clients off to other mortgage brokers. "Traditionally, you get a rate comparison online. You put in your name, phone, and email. Then, you get hammered with telemarketing and spam, and no one likes that," van den Brand explains. "If you had to boil down mortgages and why it's so broken and why people are so pissed off, it's because there are so many hands in the pot."
Despite the advantages to this model, Lenda still has some steep competition, both from banks, and from its older, more recognizable predecessors like Quicken Loans. But van den Brand says that similar to Wealthfront and LendingClub, there are advantages to being the newcomer in an industry that has so many deeply entrenched inefficiencies.
"When these companies were starting, the technology just wasn't there. They didn't have electronic signatures, or mass adoption of shopping online, so they built these processes around it," he says. "So you're talking about hundreds of bubbles on this workflow that are slowly but surely going to be popped through automation. Ultimately our vision is to get you a home loan online with the click of a button."