Have you ever seen a cool new idea and wondered how on earth it took so long to come up with it?
One such idea, at least in this author’s mind, is matching private lenders with non-prime borrowers online. And a start-up called Strategic Matches is now doing just that.
Strategic Matches simplifies the search for private lenders so “B” borrowers can get a better deal.
It works like this:
- A broker enters a client’s application on the Strategic Matches website.
- After clicking <Submit>, a window instantly displays how many lenders match the borrower’s needs. (Click to enlarge image)
- The broker can then send the application to multiple lenders (or just one) for a quote/commitment. (Click to enlarge image)
- Each lender has 2 business days to respond (i.e., send back a commitment or contact the broker)
- After the lender quotes on the deal, the borrower has two days to accept that commitment.
The benefits:
- Brokers tend to use lenders they know. But often, the best offers come from lenders they don’t know and would never try. Strategic Matches helps borrowers get their deals exposed to more lenders, thus improving their odds of securing a lower rate, lower fees and/or better terms.
- Time savings: Shopping private deals among multiple lenders is a manual time-consuming process. Strategic Matches intends to make it far more convenient.
- The system lets newer brokers break into private lending more easily. (That could be good and bad. See below.)
- Lenders can easily pre-screen deals based on criteria that they enter into the Strategic Matches filtering engine. They never have to look at deals that don’t meet their basic requirements.
- It’s a simple way for private lenders to attract deals when they have idle money waiting to be lent out.
- Agents don’t need to give up control of their files by co-brokering with a “B-desk” or another broker.
- Agents don’t have to split their broker fees with anyone else (besides their own brokerage, if applicable).
The downsides:
- People don’t work for free, so Strategic Matches takes 1/4 point from the broker. That fee applies only if the deal closes. Brokers will likely pass it on to the client through marked-up broker fees. One can easily argue, however, that the client stands to benefit by having his/her deal quoted on by multiple lenders.
- Some lenders on the system won’t accept broker submissions that are sent to multiple others. In such cases, the broker must send applications to those lenders individually and then wait a while before sending elsewhere. That adds a small amount of inefficiency for the broker.
- If the system ever really catches on, the competition factor could potentially push down yields at MICs and private lenders. (This could be a positive for consumers.)
- Some brokers may not do enough due diligence on an unfamiliar lender before recommending it to the client.
Strategic Matches has 29 lenders from B.C. on its system, 14 from Alberta and 7 from Ontario. The focus during the rollout is British Columbia, but founder Al Kelly plans to ramp up in Alberta and Ontario in short order. The number of participating lenders could grow rapidly if/as the service catches on.
It’s all residential financing for now. Kelly says commercial will come later.
In toying around with the interface, data entry is painless for the broker (and for the lender, for that matter). The broker dashboard could be a bit less cluttered with more easily accessible summary data on deals, but that’s personal preference.
If executed properly, this is an idea that could hit it big. Someday, many could be asking, “Why didn’t someone like D+H invent this?”
More at: StrategicMatches.com
Rob McLister, CMT
Rob, thanks for bringing this to everyone’s attention. I wish the folks at Strategic the best of luck and naturally time will tell how successful this particular venture will be.
What this does represent is change.
Private lending has for so long been the domain of those brokers with their own private lenders and while I am sure this will not change overnight, I think it is reasonable to conclude some things about connecting lenders and borrowers will gradually change.
Change driven by the internet is happening everywhere in business today.
I read a book a week but I have not been in a bookstore for 3 years.
Who would have though crowdsourcing was a real way to raise capital? Seriously, raising money for a new business with no bank, no investment dealer, no paid advisors. I am not ashamed to say I did not see that one coming.
Who would have thought that there would be a app on your phone that would turn a store into a “showcase”: where taking a picture of an item’s barcode would let you source the product on the web at a lower price and order it from the same phone. The store just became a big expensive showroom for the web.
When I hear mortgage brokers attack the idea of mortgage transactions sourced online I hear the voices of those who want to cling to the past. Believe me the full service mortgage broker will ALWAYS be here but please stop wishing something will just go away or go back to the way it was. That’s not how the world works, actually it never was.
Are there any costs or minimum requirements for a MIC to sign up?
There are no costs for a lender to register or to use the site.
There are no minimum requirements.
Al Kelly
Strategic Matches Inc
http://www.StrategicMatches.com
Another middleman after the current middleman? Great idea! How could that go wrong?
Concerned
Do you know anything about finding a good private lender?
Thanks Ron. That brings me to a favorite quote about change from Jay Asher, albeit modified:
“You can’t stop the future
You can’t rewind the past
The only way to be successful
…is to press play.”
My concerns are
1) the control of the borrower’s private information.My private’s sign a contract accepting responsibility for the security & safekeeping of any & all private information & documentation I send to them.Whether you realize it or not we have access to & liability of securing a vast wealth of personal information.
2) Know your client.Who are these lenders?Who has screened them & to what level? are you dealing with legitimate privates or are you helping Vinnie Boombots launder dirty money?
3) Whatelse is being done with the information being sent via SM?Whom else will have access to it?
I love the Internet & the boundaries it stretches.Strategic Matches concept is terrific,but fill in the important details for me.
Being new to the industry, what has surprised me is that this hasn’t already existed and now I am surprised that it is limited to private lenders….they should have a system where I just key in the borrower’s info and the systems should provide me with a list of potential lenders who would do this type of deal…where my borrowers info and the lenders criteria are a match….but maybe I’m so new that this does exist and I just don’t know it yet?
to mderrick – it does exist in some broker offices ( internally ) and some super broker formats( again internally)
to the private / alternative market – I second Ron’s comments, but like syndication of mortgages, the process is simple, but the disclosure process to all parties can create great risks for this format. Brokers who deal with privates get asked the question on every deal – is this a good deal. we answer with paper disclosures but ultimately the goodness and the matching of risk is the skill of the individual broker and the private investor depends upon this hands on advice. No one complains when things go right, but when losses occur, the public cries out against the broker for failure to protect. Then we get legislators involved who want us to provide prospectus of risk assessments, and the process will get bogged down with paperwork and the speed of closing and flexibility will be reduced. However, looking at potential problems is not the reason for not moving forward. The cautious broker advisor to date is what has made the private market so lucrative and with minimal litigation for wrong doing. The innocent public getting 1% returns is ready and ripe for mortgage investments as an alternative with returns of 7% to 16%, on “safe” investments because they are attached to real estate. But ultimately a higher interest rate does not make a bad deal, any better. I will watch with cautious optimism
“There are no minimum requirements”
You might want to rethink that policy to protect borrowers.
Hi David.
Strategic Matches was built from the ground up, with the security of information being the foremost concern. The site is tested to PCI (Payment Card Industry) standards and is independently tested from both external and internal access. This is not a public web site; only authorized users have access.
The activated users on the system are required to be licensed and/or authorized to do business in their respective provinces.
I fully agree that a Broker should do their homework on a Lender they do not recognize, before recommending that Lender to their client.
Lastly, the site provides a direct link from the Broker to the Lenders, and those are the only people who have access to the information.
My personal history is all in Banking and the mortgage business, so I have a solid understanding of the requirement for privacy of client information.
I hope this information addresses your concerns, and I welcome the opportunity to give you a tour of the site.
Al Kelly
Strategic Matches Inc
To clarify for JJohn.
A lender has to be registered and/or approved to do business in their respective province.
Al Kelly
Strategic Matches Inc.
It just boggles my mind that with all the red lights flashing every single day, that people still create business models in real estate. Another middleman looking to take another piece of the pie. It’s doomed to fail on lack of demand alone.
@drmortgage just wanted to say thank you for providing such a well thought out response!