Mortgage lending is still quite broken, and the crisis of the mid-to-late 2000s only made lenders even more fearful of getting tangled up with unreliable borrowers. But one company, Privlo, is not convinced that traditional mortgage lenders are catching all good loan candidates. So with a fresh $3.8 million in seed funding, it’s setting out to build an alternative mortgage-lending company. By using various sets of data and proprietary software, Privlo finds people who might have been denied traditional mortgage financing, but who, according to its criteria, are still reliable candidates. It then issues them a loan, which they interact with through Privlo’s site. Privlo first underwrites the loan and then passes it on to an unnamed investor, which has committed $350 million to Privlo-issued loans.
Privlo Inc., an online provider of real estate loans, raised $350 million in debt and $3.8 million in equity to expand in the U.S. The Los Angeles-based company said it raised the equity from Spark Capital and QED Investors and declined to name the debt provider. Privlo, which has 28 employees, plans to double its workforce by the end of the year, said founder and Chief Executive Officer Michael Slavin, who declined to comment on the company’s valuation. “We’re really excited to do something meaningful for the economy, providing liquidity to an important segment of the housing market,” he said. While it’s atypical for technology startups to raise as much debt as Privlo is doing, the debt is key for the company to be able to make loans. The startup, which began in 2010 as a peer-to-peer lender, has since evolved to providing mortgages to borrowers who aren’t eligible for traditional bank loans. Privlo has so far done 100 mortgages of about $200,000 at rates of 6 to 8 percent, compared with other lenders that charge 10 to 15 percent, said Slavin. The startup is tapping into a market worth $250 billion annually, or $1 trillion including so-called jumbo loans, he said. Privlo said it has developed software to evaluate borrowers’ risk, which enables it to close mortgages in weeks instead of months. Slavin, 35, grew up in a family of real estate investors and previously worked in real estate private equity. He said he got the idea to start Privlo after the 2008 financial crisis left many high-quality borrowers, such as the self employed, uncovered by traditional lenders.