2015-12-28
Subprime loans and risky borrowers: A recipe for disaster
Alternative lending has been a saving grace for many borrowers that had nowhere else to turn when the credit market dried up in the wake of the 2008 housing bubble collapse. For borrowers, alternative finance became the only option when banks tightened lending standards. But have alternatives simply moved subprime risk to a new conduit? Let’s dig into the question.
Subprime loans and risky borrowers: A recipe for disaster
During the housing bubble, the number of subprime mortgage loans being originated in the U.S. exploded. Many loans were made to risky borrowers with FICO scores below 620, while “Alt-A” loans -- those made to borrowers with good credit scores but poor employment history -- also ballooned. Often, these loans had unfavorable terms, like 2/28 hybrid mortgages, which have low fixed interest rates for two years before costs increase dramatically. The stats are staggering. The subprime mortgage loan market grew from $65 billion in 1995 to $625 billion by 2005. As of March 2008, the subprime market was estimated to be 11.8% of the total mortgage loan market -- a recipe for disaster.
The bubble had to burst
When the mortgage bubble burst, many of the world’s largest lenders found themselves fighting to survive at all costs. Between 2007 and 2009, real estate values in the U.S. dropped by $6 trillion. The world’s 100 biggest financial institutions wrote off over $370 billion in subprime-related losses. Part of this struggle to remain solvent included a drastic reduction in lending. Not only could subprime borrowers no longer get loans, many borrowers with solid credit were left out in the cold as well.
The alternative finance revolution: A better way?
In the aftermath, alternative lenders like LendingClub and Prosper recognized the huge opportunity the crisis created and quickly established a sizable new market. LendingClub alone reports it has now issued over $13.4 billion in alternative loans. Notably, leading alternative lenders are taking steps to make sure their platforms avoid the dangers of pre-crisis subprime lenders faced. Many members of the industry have higher lending standards than subprime mortgage lenders did before the housing bubble. LendingClub, for example, requires a minimum FICO score of 660 for its borrowers and Prosper requires a FICO score of at least 640 -- both fall above the 620 threshold that classifies a borrower as subprime. This duo also doesn’t issue deceptive or irresponsible terms seen in subprime mortgages, such as the aforementioned 2/28 hybrids; all of LendingClub’s and Prosper’s personal loans have fixed rates and equal payments over time. Of note, Avant does have less stringent credit requirements than other players in the space. The startup offers what it calls near-prime loans to borrowers not quite prime, but not as risky as their subprime peers. Understanding borrower risk and assigning appropriate interest rates isn’t the only advantage alternative lenders have in their corner, though: They’re also using more advanced underwriting models than those used by traditional banks. Upstart, which advertises “data-driven” personal loans, is just one example of a company using an income-prediction algorithm that takes profession, college, major, standardized test scores, grades, projected inflation and more into account.
A higher standard
America’s mortgage lending market certainly wasn’t always as wildly irresponsible as it became during the height of the housing bubble. Lending standards gradually loosened over time right under the nose of regulators. This underscores a key reality: As the explosive growth in marketplace lending continues, governments will need to monitor the practices of the industry’s leading players. For now, though, it’s clear the space is holding itself to a much higher standard than subprime mortgage lenders did almost a decade ago.
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MoneyLion Wins “Best Financial Literacy Tool” and “Best API” at Benzinga’s 2022 Global Fintech Awards
MoneyLion’s consumer and enterprise businesses were recognized as winners of Benzinga’s 2022 Global Fintech Awards at this year’s Fintech Deal Day
New York, December 14, 2022-- MoneyLion Inc. (“MoneyLion”) (NYSE: ML), the go-to destination for personalized financial content, products and advice, is proud to announce that it has been named “Best Financial Literacy Tool” at Benzinga’s 2022 Global Fintech Awards. MoneyLion’s enterprise business, Even Financial, was also named as the winner for “Best API.”
MoneyLion and Even Financial were honored alongside other top Fintechs, banks, research companies and more. MoneyLion’s consumer business continues to push financial literacy through innovative and personalized content. With the MoneyLion app, users can view personalized financial content in short-form video format and receive personalized financial product recommendations such as loans, insurance and investing. As MoneyLion’s enterprise offering, Even Financial digitally connects and matches consumers with real-time personalized product recommendations from banks, insurance carriers, and Fintech companies on mobile apps, websites and other digital touchpoints through its financial product search engine and Embedded Finance Marketplace technology. This technology powers both the MoneyLion Marketplace, in the MoneyLion app, as well as more than 1,000 enterprise partners.
“We’re thrilled MoneyLion’s consumer and enterprise businesses were recognized by Benzinga,” said Dee Choubey, Co-Founder and CEO of MoneyLion. “Both awards showcase MoneyLion’s every time you money approach to helping our customers. The financial literacy gap is a huge problem for millions of Americans and we remain committed to reducing its effects through engaging, informative content and key partnerships designed to bring an elevated educational experience to all.”
These awards follow the October announcement of MoneyLion University, where MoneyLion launched its latest initiative aimed at closing the gap in money and financial education across the United States.
“We could not be more pleased with Benzinga’s recognition of our company’s API technology,” stated Phill Rosen, CEO and Founder of Even Financial. “Our technology natively integrates real-time credit decisions and product recommendations from the industry’s largest network of connected financial services providers, offering access and choice to consumers searching for financial products. Our elegant Embedded Finance Marketplace, API and search engine enable any company to add trusted, personalized financial products and services to their business, reaching people when and where they need it.”
Even Financial has been named a listmaker for the Benzinga Global Fintech Awards for the last two years and was a previous award winner. In 2021, Even was selected as a listmaker for Best API and, in 2020, selected as a listmaker for both Best API and Best API Platform. In 2019, Even was awarded the Benzinga Rocky Award.
The annual Benzinga Global Fintech Awards take pride in recognizing and honoring the companies and individuals who are propelling the Fintech and financial services industry forward with the most impressive technology advancements and innovations. A panel of industry experts from a wide range of companies reviewed and judged the nominations. Winners were announced at Benzinga’s Fintech Deal Day on December 8, 2022, where MoneyLion’s Chief Customer Officer Cynthia Kleinbaum spoke on the panel, Expert Growth Hacks For Reaching Underserved Markets.
About MoneyLion MoneyLion is the go-to destination for personalized financial content, products and advice. MoneyLion’s mission is to rewire the financial system to positively change the path of every hard-working American. MoneyLion uses its proprietary data advantage and technology to empower its customers. MoneyLion engages and educates its customers with daily, hyper-personalized money-related and money-adjacent content that is delivered through each customer’s own content feed. MoneyLion provides its customers a full suite of financial and non-financial solutions, bundling its proprietary, low-cost financial products with products that are offered through its marketplace technology and network affiliate partners. MoneyLion also leverages its distinct data, technology, and network advantages to deliver leading embedded finance and marketplace solutions for enterprise customers. Since its founding in 2013, MoneyLion has empowered millions of Americans to take control of their finances and live their best financial life, every day.
For more information about the company, visit https://www.moneylion.com/ and https://www.evenfinancial.com. For investor information and updates, visit investors.moneylion.com and follow @MoneyLionIR on Twitter.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221214006032/en/
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Built In
Even Named A Built In “2023 Best Places to Work”
New York, Jan. 11, 2023 -- Even Financial ("Even"), an independent subsidiary of MoneyLion Inc. (NYSE: ML), and a leading embedded finance marketplace platform, is proud to announce that it was honored in Built In’s “2023 Best Places To Work” Awards. Specifically, Even earned a place on the Hybrid Best Places to Work in New York.
The Best Places to Work Awards, now in its fifth year, honors companies across numerous categories, sizes, remote-first employers as well as in person and hybrid working companies across the U.S.
Built In determines the winners of Best Places to Work based on an algorithm, using company data about compensation and benefits, and also weighs criteria like remote and flexible work opportunities, as well as other people-first cultural offerings.
This announcement follows Even’s recent win at the Benzinga Global Fintech Awards for “Best API.”
About Even Financial
Even is the industry-leading embedded financial marketplace and independent subsidiary of MoneyLion Inc. (“MoneyLion”) (NYSE: ML). MoneyLion is a leading digital financial services and lifestyle content platform serving both consumer and enterprise customers. As part of MoneyLion’s enterprise offering, Even digitally connects and matches consumers with real-time, personalized financial product recommendations from banks, insurance carriers, and fintech companies on mobile apps, websites, and other digital touchpoints through its marketplace technology. Even's infrastructure leverages machine learning and advanced data science to solve a significant pain point in financial services customer acquisition, seamlessly bridging financial services providers (such as SoFi) and channel partners (such as TransUnion) via its industry-leading API and embedded finance marketplaces. Even enables any company to add financial products to its business, with full compliance and security at scale. Even was named one of "America's Best Startup Employers'' by Forbes for 2022 and was named to the 2021 Deloitte Technology Fast 500, which recognizes the fastest growing tech companies in the world. Learn more at www.evenfinancial.com and investors.moneylion.com.