When Personal Lenders Become Mortgage Lenders

[Nov 12, 2009.]

 

Making unsecured personal loans and making mortgage loans have, over the years, been the respective provinces of different kinds of lenders. Individuals and companies who make unsecured personal loans or some variation thereof, such as payday loans, have focused on streamlining the application process so that people can get approved for small personal loans of $200 - $1,500 without a lot of paperwork.

Mortgage lending has been the exact opposite: a paper-intensive, rules-and-regulations-laced, government-sponsored affair to remember.

The big banks have already been offering both of these types of loans. But now, some "boutique" lenders are offering both personal loans and mortgage loans.

CashCall Strategy Reveals Interesting Fact About Loans In General

Regular drivers of the Los Angeles freeway system, and also fans of the child star Gary Coleman, may be familar with a company called CashCall. This is a lender that has provided cash loans in short periods of time, and hired Gary Coleman to tell all about how CashCall got him out of a tough bind.

CashCall has begun offering mortgage loans. Not in the sense that the company holds the loans to maturity, but that CashCall originates the loan. The rates advertised by CashCall are extremely low.

CashCall, though, does not want to do your paperwork for you, or for any other customer. Rather, borrowers must have their "loan packets" tight and ready to go, or else forget that low rate.

This trend towards simplifying the mortgage application process is a trend that favors the entry of personal lenders into the mortgage market.

Personal Lenders vs. Mortgage Lenders for the Borrower's Dollars

Personal lenders traditionally spread their risk as thin as possible. Mortgage lenders rely on government guarantees or may hold some loans in-house.

Historically, the short and the long term lender have been two different breeds, and not necessarily the most copascetic to each other. Part of this rivalry, if that word can be used, is based upon the notion of who gets access to the borrower's dollars in case of a loan default.

In the case of the personal lender making an unsecured personal loan, the "security" of the loan is the borrower's credit score, plus all the information the lender has about the borrower, so that if the loan defaults the borrower can be pursued to pay the debt.

In the case of the mortgage lender making a home loan for a personal home, the security of the loan is the borrower's credit score, plus the value of the house itself.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.