Virgin Money joins the Uncrunch America Campaign

Uncrunch America originally attracted attention when it amassed thousands of votes and was a top 10 idea in change.org's campaign to find the top ideas for change in America. The idea gained additional momentum this week as Virgin Money joined competitor Lending Club to help raise awareness about the availability of alternative sources of credit.

Virgin Money facilitates loans through family and friends which is different than Lending Club's model. While loans between people who know each other can be made through Lending Club most of Lending Club's loans are made between people who do not know each other.

In addition to social loans, Virgin Money just entered the traditional mortgage loan market. Virgin Money is approved in 35 US states for both conventional and FHA loans and they expect to be fully licensed by the end of 2009. More than 150 mortgage brokers have joined their network.

Here are the three options presented to visitors at Uncrunch America:

Personal loans - If you have good credit you can now get a personal loan of up to $25,000 funded by fellow members at a fair interest rate through Lending Club. Free membership and easy online application.

Small business loans - If you are a small business and need more than $25,000, On Deck Capital has been actively lending to small, healthy, store front businesses throughout the credit crunch.

Home loans - Traditional Mortgages or Social Mortgages, Virgin Money has creditworthy borrowers covered. Check out our traditional mortgage for fair rates and a fast closing or consider our social mortgage for a great deal if you're borrowing from family.

Microplace offers 5% interest rate to investors

With our 401Ks hemorrhaging and the stock market falling, many are looking for a more stable savings/investment opportunity (see my earlier posts on SmartyPig and Pertuity Direct).

Microlending, which has been available for many years, is responding. Microlending organizations are now offering interest-bearing products. Microplace, a division of Ebay (NASDAQ: EBAY) has been offering interest-bearing microloan investment opportunities for some time, however they’ve just recently partnered with MicroCredit Enterprises to begin offering a 5% yield “Global Investment Note,” which benefits the working poor in more than 20 countries on four continents.


Jonathan C. Lewis, CEO of MicroCredit Enterprises, said in a company press release “investors realize that the greatest return in the world is the chance to lift someone out of poverty. Earning a fair financial return is just a bonus.” MicroCredit Enterprises is a private sector, anti-poverty program that leverages the private capital of high net worth individuals to provide small business loans to impoverished entrepreneurs in developing countries. This partnership with MicroPlace will make their investment opportunities available to investors who have as little as $20 to invest.

The term on these notes is 24 months (two years) and the fund focuses on women entrepreneurs, with women making up 89% of borrowers. The MicroCredit Enterprises portfolio reaches 505,000 poor worldwide. The global average interest rate charged to borrowers is about 31%. But this is much lower than predatory lenders and loan sharks who are often the only options for the working poor. Also, the repayment rates on microloans historically average 97%.

Like John F. Kennedy said, “A rising tide, raises all boats.” Most of our 401Ks and investments are sinking like Titanic. In the meantime, non-profit organizations are folding like card-houses, and Americans are cutting back their charitable contributions. Some may want to consider an alternative investment and charitable contribution combo (without the tax advantages of course). Why not consider raising some boats anyway?

Some things to remember with this kind of investment. While registered with the Securities Exchange Commission, it is not FDIC or SIPC-insured.

For more information about the 5% note, you can see the prospectus online here.

Here's some additional info from a Q&A session with MicroPlace:

How is Microplace able to offer such a high interest rate? what kind of interest rates are the Okicredit borrowers paying?

MicroCredit Enterprises is the security issuer of the 5% investment, which is called the Global Poverty Alleviation Note. MicroPlace does not determine the interest rate because MicroPlace is not the security issuer - MicroCredit Enterprises is.

The interest rates that borrowers pay is determined by the microfinance institutions (MFIs) in each country, so they vary depending on the institution and the borrowers. Oikocredit and other security issuers do not determine that rate.

The global average interest rate charged to borrowers is about 31%. But this is much lower than predatory lenders and loan sharks who are often the only options for the working poor. Also, the repayment rates on microloans historically average 97%.

Is Microplace at all afraid that the 5% note will cannabalize the other, lower-interest, investment opportunities?

Not at all. There is a very wide range of investment opportunities on MicroPlace, each offering different features, e.g.: interest rates, locations, issue-focused like women and fair trade, level of poverty, etc.

These are tough economic times, and many would be investors are looking for a little more liquidity in their assets. Would MicroPlace consider offering something like Pertuity Direct's mutal funds, only invested in microloans? This would give investors the security that they could get their money if they needed it, without waiting for a maturity date.

Funny you should ask! MicroPlace just started offering a liquid investment, which you can review here.

Are Okiocredit and MicroCredit Enterprises the same?

No, they are different security issuers. Here's how it works:

MicroPlace is the platform that allows investment transactions to take place, they are not actually the security issuers (where people purchase their investments). MicroPlace partners with issuers, like MicroCredit Enterprises, Okiocredit and Calvert Foundation who do the issuing. MicroPlace has partnered with them because they have decades of experience in the socially responsible investing space and deep roots across the globe in these communities.

Jessica Ward is a freelance writer based in Seattle. You can follow her musing on Twitter @jessc098.

SmartyPig - Real savings for the rest of us!

A presenter at the FINOVATE conference in April will be SmartyPig.com. We at PLR thought you might like to know about this Iowa-based firm before that, so here’s a little primer on the company.

First, SmartyPig is not a bank. It’s an “independent online transaction solution.” A fancy name for an automatic withdrawal system that works with your bank and an FDIC-insured Savings Bank. Their banking partner is the 115-year-old publicly traded West Bank (NASDAQ: WTBA).

Put simply, it’s an automatic savings solution. You can really “pay yourself first” and mean it. When you set up an account, it is for a specific savings goal, and a dollar value $2,000 for a flat screen TV or $8,000 for a honeymoon cruise for example. You’ll also have to say when you want to accomplish your savings goal. TV for Superbowl next year? SmartyPig will calculate how much to automatically withdraw from the account specified to make achieving your goal as painless as possible.

Additionally, SmartyPig has a major social media component. Once you log in you can share your savings goal with friends and family. This would be great for families saving for their new baby, or newlyweds saving for a house, or even your little one’s college savings accounts.

Grandma and Grandpa can easily make deposits to the Smarty Pig account via your Facebook page or blog.

SmartyPig offers high interest rates (right now at 3.25%) but with minimum balances of just $25. How so high? They say the overhead is low, and they so far they don’t need to run an advertising campaign, further suppressing costs.

Oh, and did I mention there’s more? Once you’ve met your savings goal, you cash out with a gift card, AHC deposit or check. But if you were saving up for a specific purchase, request your payment in the form gift card, and get a boost of up to 6% with one of their Best in Class Retailers. They have partnerships with Zales, Best Buy, Sandals Resort, Amazon.com and many other leading retailers. Talk about value!

Each SmartyPig customer can have as many savings goals as they want, and the SmartyPig service is free.

They don’t disclose how many accounts there are, but they do say that the average account goal is $8,500, four years in duration and that the most frequent goal is vacation savings.

SmartyPig launched in March of 2008 and is a privately held company. Just before Christmas of ‘08 they also launched in Australia and New Zeland with their partner Australia New Zealand Bank (ANZ).

In an email interview with Jon Gaskell, co-founder of SmartyPig, he told me that because of SmartyPig’s structure as a “transaction engine,” SmartyPig can be up and running in any country, any language and any currency in 60-90 days. Watch for growth from SmartyPig for sure. When I questioned about expanding to other savings accounts Gaskell responded “We want to continue trying to perfect the social side of saving all over the world.” Lookout world—SmartyPig is on the move! I can’t help but wonder if in pursuit of global savings domination if they’ll have to adjust their corporate image to enter some markets? I don’t see the SmartyPig brand being universally accepted in all cultures, but I’ll be watching their growth for sure. It should be very interesting.

I also pushed Gaskell on the issue of savings. How can you really “sell” savings in a country that culturally just isn’t used to it? Americans are charging literally Trillions of dollars every year on plastic. I questioned as to if this is Field of Dreams scenario where if they build it we will come, or if he foresees a savings trend. He notes that while American Savings rates have been in the negative for years, they are starting to swing into positive numbers. He notes that SmartyPig isn’t innovative other than bells and whistles. It’s simply implementing the age-old tradition of save first, buy later. Timeless and wise financial advice that transcends all cultures.

If you would like to know more about how my experience was in setting up my SmartyPig Account visit my blog at for my review from a customer's perspective.

Jessica Ward is a freelance writer based in Seattle and enjoys writing personal finance, corporate profiles and non-profit profiles. Disclosure: she also happens to be a very happy SmartyPig customer.

Virgin Money Enters US Mortgage Market

Some might call Sir Richard Branson crazy. Others call him crazy successful. In his latest US financial adventure, he may be both.

At a time when all the banks are leaving the mortgage market like rats from a sinking ship, Virgin Money USA is jumping in the water. Last year, the UK based Virgin Corporation acquired Lendia, a US mortgage originator and processor and is now offering wholesale mortgages to broker in the USA.



With sales slogans like “Kiss Me I’m Loan-y” and “Loan Brokers Do It Better,” it’s certainly the first mortgage wholesaler I’ve ever noticed. Further proof marketing works I guess, even Virgin’s shocking brand of marketing. Only Virgin can try to make a mortgage sexy.

That said, they shouldn’t need it at all. This is a company that on all levels is famed for customer service and for championing its customers. They’ve actually entered this market due to the lack of service-oriented wholesalers. Asheesh Adveri told the media in a company press release that “Virgin Money sees a growing service gap in the mortgage industry which we plan to close and own.”

They’re offering some innovative features including real time status updates, rate quotes, paperless underwriting, and the ability to import loan applications directly via the broker’s loan origination system—novel and efficient characteristics in this industry that is traditionally slow to innovate.

Virgin Money is already approved in 35 US states for both conventional and FHA loans and they expect to be fully licensed by the end of 2009. More than 150 mortgage brokers have joined their network. For more info see www.virginmoneyus.com.

Jessica Ward is a freelance writer based in Seattle who enjoys writing on business and finance topics as well as humanitarian topics.

Kiva passes $60 million in loans

Kiva just surpassed the $60 million mark in loans through their microcredit platform. Kiva's target for 2009 is to lend another 60 million dollars matching what they did the first three years.

Here is a look at their current stats:

Total value of all loans made through Kiva:	$60,226,510
Number of Kiva Lenders:	446,097
Number of loans that have been funded through Kiva:	85,996
Percentage of Kiva loans which have been made to women entrepreneurs:	77.94%
Number of Kiva Field Partners (microfinance institutions Kiva partners with):	95
Number of countries Kiva Field Partners are located in:	44
Current repayment rate (all partners):	97.74%
Current default rate (all partners):	2.26%
Average loan size (This is the average amount loaned to an individual Kiva Entrepreneur. Some loans - group loans - are divided between a group of borrowers.):	$429.83
Average total amount loaned per Kiva Lender (includes reloaned funds):	$134.90
Average number of loans per Kiva Lender:	3.69

Are you on Kiva? Join our Kiva team.

Nuwire's Cost-Cutting Tips for Businesses: #1 Peer to peer lending

NuWire Investor just published an article titled Ten Cost-Cutters for Businesses. Here is their first tip:

Capital: Free money almost always comes with strings attached. But if you really need capital, here are some ways to get cash, for a limited time or a small fee:

• Peer-to-peer (P2P) lending is a way to find private lenders who will lend money in exchange for equity or some other security. Prosper.com is one source.
• Microlending groups offer business loans at very low rates. These are not exactly free, but they come close.

I agree that peer to peer lending is an attractive source of capital for some small businesses. I am not, however, aware of any peer to peer platform which requires an exchange of equity or some other security. Prosper, Pertuity Direct, and Lending Club only provide unsecured loans.

Although the article does not mention it, Prosper is actually closed right now while they register with the SEC.

Microlending typically refers to very small loans. With Grameen America, for example, the average loan size is $2,000. These are generally targeted to poor entrepreneurs, typically women, who do not have access to traditional credit markets. The upper limit on loans through most peer to peer lending site like Lending Club is $25,000.

While I'm pleased to see NuWire mention peer to peer lending, the information presented is a little inaccurate.

People Capital prepares for 2009 launch

People Capital announced they received funding from the Radcliff Group in an effort to prepare their student loan peer to peer lending site for the 2009 academic year. An excerpt from the press release is reprinted below.

Fynanz, the first peer to peer site to focus on student loans, recently suspended accepting new borrowers and lenders due to "market conditions."



People Capital, developer of an innovative peer-to-peer student loan platform, announced today that it had secured a second financing round from Radcliff Group Inc., a New York based private equity firm. The funding will be used to enhance People Capital's Human Capital Score™, a model that provides a true measure of the creditworthiness of a student, and to develop its next-generation peer-to-peer (p2p) lending platform to provide improved access to private student loans.

Warren Serenbetz, Jr., CEO and President of Radcliff Group, stated that, "People Capital offers a truly unique approach to education financing, combining traditional and innovative approaches that produce an attractive yet safe lending scenario for students and the individuals and institutions that invest in their educations." "Our peer-to-peer lending platform brings a unique solution for students to finance their college educations. It leverages our cutting-edge research into developing a credit risk assessment methodology based upon students' potential, rather than merely their credit payment history," said People Capital Founder and CEO Thomas Shelton.

"Our unique Human Capital Score means that we can underwrite students without credit history by being able to project individual income levels and ability to pay. Traditional methods ignore a student's potential. Based on research coming out of The Wharton School Insurance Department, we incorporate merit data such as GPA, standardized test scores, college and major to provide a true and unbiased, data-driven measure of the economic value of an education. Our credit assessments will allow lenders to make credit risk decisions based on the true potential of the borrower."

Poised for funding the 2009 academic year, People Capital has formed a world-class team of professionals including veterans of the student lending, consumer finance, credit ratings and new media industries. A more detailed business plan is available to qualified investors and institutional partners.

Javelin reviews investing with Lending Club

Javelin Strategy & Research just released a 12-page whitepaper analyzing investments through Lending Club between June 2007 and December 2008. They found the overall investment return averaged 9.05%, with a median return of 10.48%.

Compared to other investments, Javelin reported:

"If an individual had invested $10,000 in June 2007, a typical (median) loan portfolio through Lending Club would have grown to $11,594 by November 2008. That return would have outpaced other common investments or indexes such as the Standard & Poor’s 500 Index and the tech‐stock heavy Nasdaq Composite Index, which suffered staggering losses that would have left the investor with $6,289 and $6,604, respectively. Meanwhile, the same investment in government‐insured 1‐year CDs and rock‐solid 6‐month Treasury bills would have grown to $10,678 and $10,501, respectively. (This comparison factors in Lending Club’s 1% service charge but does not include fees and other transaction costs for the other investments.)"


Read the whitepaper. Open a Lending Club account.

Pertuity Direct--Social Lending Meets Mutual Funds

Following my review of Pertuity Direct and Tom’s announcement of the official launch, PLR was contacted by the PR team at Pertuity Direct for an interview, and I was fortunate enough to talk with their management team including CEO Kim Muhota and Charlie Schliebs who is an independent board member for the National Retail Fund, which holds Pertuity’s funds. Also on the call was Lisa Lough, SVP of marketing for Pertuity, Inc.

As we mentioned before, this team has experience and credentials to spare, but their energy for their business model is also extraordinarily contagious. My prediction is that the combination of this energy, the security of their mutual fund-style of social lending and the precipitous failing of traditional lending is going to serve Pertuity well in the near future.

We’ve recently covered them, so I’ll keep this post short and focus on the new items that I’ve learned and a brief futuring discussion that I had with Kim and Charlie who indulged my interest in their version of what the future of social banking may hold.

For Lenders: Pertuity Direct is “social lending interval fund,” where lenders buy into a risk-classed pool of borrowers. Two pools are available now via the National Retail Fund for, but others are planned for the future. An advantage to the mutual fund approach is liquidity in your assets. You don’t have to wait a 3 year loan term to get your money back. One disadvantage is slightly higher maintenance fees, right now at about 3.17%. (I’m not sure how this offsets with the default rates in traditional P2P loans, so if anyone has thoughts on this, I’d love to hear them). Pertuity Direct requires a minimum investment of $250 USD, and you’ll experience a small fee if you withdraw before one year in the fund.

For borrowers there are several advantages. First, you don’t have to spill your financial guts or upload a glamour shot to get funded. Nobody will take your spelling into account in funding your loan (I’m guilty of this with my Lending Club account). Borrowing on Pertuity Direct doesn’t feel like running for Prom Queen in high school. You will know what interest rate and terms you’ll be offered and you can take it or leave it. Your loan will be approved or not, and funded within three days, just like a bank. The process is simple, familiar and respectful of your privacy.

Muhota has had a long time to stew on this plan. He first formed his idea seven years ago and has followed the trends. Plans for launch went on hold as they decided how best to comply with SEC regulations to ensure a secure product and legal compliance on all sides, and they launched PertuityDirect.com on January 22, 2009.

When I asked Kim Muhota and Charlie Schliebs about the prospects for long-term social finance, their energy level became even higher. They agreed that many people are loosing faith in traditional banking, and expecting more from their money. When I asked what the near future may hold for Pertuity, Muhota explained that they’re looking into shorter and longer term products for borrowers. I pressed further and asked if that might include “social” mortgages and revolving lines like credit cards. He replied “absolutely” elaborating that consumers and lenders alike are going to be drawn increasingly to the low overhead, lack of what he called “legacy costs” and the growing uncertainty of traditional banking.

I’d have to agree. Why have your money buying some Bank MBA’s Bentley when you could have it working for you in a high yield, responsibly managed product that comes equipped with all of the institutional rigors of a traditional banking product?

Special thanks to Pertuity Direct’s team for spending some time with me this week.

Jessica Ward is a freelance writer based in the Seattle area.

Insider: Mortgage loan modification advice

This post was contributed anonymously to Prosper Lending Review in an effort to warn homeowners of the unethical behavior of some mortgage loan modification companies. The author has stopped assisting with loan modifications pending more information from the office of the Attorney General.

I own a small notary signing service. I’m frequently called upon by out-of-state banks to be their witness to their clients signing loans or financial documents. Likewise, I witness signatures on powers of attorney, wills and other legal documents. In recent weeks, almost all of my work has been on loan modifications.

First things first: What is a loan modification? A loan modification is an agreement between lender and borrower to adjust the terms of a mortgage. This is generally only done on primary residences for borrowers who are considered to be at risk of foreclosure. A loan modification is not a refinance. It is a not a new loan—it is modified terms to the original loan—generally at a loss to the lender. The lender’s two opportunities are to cut you a deal, or to take the house and risk the already flooded market with the home.

Second: Who provides loan modification services? Practically anyone. This is the latest craze in the financial and real estate world, and a service called “loan modification assistance” is being provided by practically any kind of real estate or financial organization for a fee. However, in the purest and truest form of the matter, a loan modification is only performed between the borrower and lender.

Loan modifications can be performed by individuals, working direct with their lenders or a non profit debt relief agency or a government lending or housing agency (such as HUD, Fannie May or Freddy Mac or Indy Mac).

Several major mortgage providers including CitiGroup, JP Morgan Chase, Countrywide, Nationwide and Bank of America have launched “homeowner retention” programs on their Web sites.

Attorneys and firms calling themselves “legal services” or “real estate services” (which in my experience are sometimes neither) may offer to do this service for a fee ranging from $100 to $5000, and often the fee is collected up-front without a guarantee of services to be provided. Their only guarantee is that they will contact the lender on behalf of the borrower, and they will not guarantee the result.

Whether you choose to pursue a mortgage loan modification yourself, or use a fee-based service, you should know in advance that there are likely to be some requirements:

1. You must be in arrears and unable to pay your debt but showing good faith effort to do so.
2. You must be able to demonstrate a hardship. Owning a home in excess of your ability to pay isn’t a hardship. Sudden disability or loss of employment or a serious illness is a hardship.
3. You’re going to have to show that you will be able to meet the financial obligation in the future.
4. You’re going to have to show your cards. And your budget, the good the bad and the ugly. They’ll want to see your bank statements too. If you bought Superbowl tickets or just took a cruise—you don’t have a hardship—you’ve got a bad case of confused financial priorities.
   

If you find yourself in a position where you fear the loss of your home, I encourage you to work directly with your lender first—or with a government program like HUD. A good second step may be to have an experienced mortgage attorney look at your existing loan documents to see what opportunities you have. If, for instance, you did not receive truth in lending documents or the notice of right to cancel you may have some grounds to get a better term from your lender.

If you feel like you need to use professionals, you should contact your state attorney general’s office to see if the provider you would like to use is licensed in your state or if any complaints have been made against them. Likewise, check with the Better Business Bureau at www.bbb.org. Licensing rules for these modification companies ranges wildly from state to state, so the Attorney General’s office will be able to tell you if there are actions pending on the issue and or what agency in your state regulates this practice.

Several states, including Washington and California have issued warnings about fraudulent practices in the loan modification business. The Federal Trade Commission has published a warning about foreclosure rescue scams. As with any other service, be a smart consumer and know your provider.