Mortgage refinancing is a headache. From finding the right lender to filling out reams of paperwork, it’s time-consuming, confusing and expensive.
After 11 years in the mortgage business, Jason van den Brand couldn’t believe that a process so convoluted hadn’t been addressed with new technology. So he left his position at a brokerage firm and started Lenda.
Dubbed “TurboTax for mortgages,” San Francisco-based Lenda (originally called GoRefi) lets borrowers apply for and complete a mortgage refi online. The company has a $20 million line of credit with an undisclosed Texas bank, allowing it to make loans directly; it then sells the loans at a small premium to institutional investors. (Van den Brand says Lenda is in talks with other banks.)
Lenda claims that its refi clients save an average of $8,000 in closing costs, including commissions, fees and overhead, as well as 45 days in processing.
The company is issuing loans in California, Washington and Oregon, with plans to be in 40 states by the end of 2016. Loans closed and funded for its 160 clients total nearly $50 million.
In 2014 Lenda landed a coveted spot at 500 Startups, a Mountain View, Calif.-based seed fund and accelerator program founded by former executives of PayPal and Google. Dave McClure, founding partner at 500 Startups, says Lenda’s savvy management team appealed to investors. Before pitching 500 Startups, van den Brand and his co- founder, CTO Elijah Murray, used their data access and sleuthing ability to find out that accelerator partner Christine Tsai was refinancing her home. In a move McClure calls “creepy but well-targeted,” the duo prepared a document that included her name, address and a pretty accurate estimate of the loan amount, which they delivered to her the day before the meeting. Apparently she was impressed.
After graduating from 500 Startups, Lenda secured a $1.8 million seed round. Van den Brand says the partners met with 135 potential investors, mostly connected through the accelerator program. He wanted a team that had financial technology experience -- and got exactly that with investors that included Winklevoss Capital Management, Structure Capital and China Growth Capital. Lenda hopes to close a Series A round in early 2016.
In addition to experimenting with online marketing channels, Lenda spent most of its seed capital on people, growing from four employees to 15. Operating at the intersection of technology and finance, the company faces fierce competition to attract and retain talent. To that end, every full-time employee -- from top engineers to entry-level administrative staff -- receives equity in the business.
There are challenges though. The Mortgage Bankers Association projects that mortgage refinances will shrink from an estimated $579 billion in 2015 to $379 billion in 2016. But that’s still a hefty market, and McClure believes Lenda can capture much of it through innovation. “Here’s some big, dumb industry that hasn’t changed for 30 years and could be made a hell of a lot better,” he points out. “That’s what we’d like to see.”