Irvine-based online mortgage lender LoanGenie.com has burned through $7 million in cash and is looking for bridge financing to see it through to a second round of funding in November. At the same time, company officials say they are recovering from an employee exodus and shifting their strategy away from loans and toward online services for mortgage brokers.
LoanGenie received funding from Newport Beach-based Roth Capital Partners earlier this year to bankroll a marketing campaign featuring actress Barbara Eden, star of television’s “I Dream of Jeannie.” Images from the show adorn LoanGenie’s Web site, and for now LoanGenie plans to continue doing mortgages,the company’s main source of revenue.
But while LoanGenie is bringing in about $2 million in annual revenue, it no longer wants to duke it out in a branding war with the hordes of other online mortgage brokers, founder Jim Creamer said. Instead, LoanGenie now is focusing on developing software for the mortgage industry.
“Barbara Eden was our original reason for using the $7 million. But we’ve chosen not to build a brand. We chose to build the technology,” Creamer said.
“It was getting crowded and that made it difficult to be successful,” said Steve Fillet, a principal in corporate finance with Roth Capital. “They seem to have good tech and have shown a good amount of agility to retool themselves.”
The LeanGenie software allows a mortgage broker to use one system to find a lender for a loan. Currently, a broker has to contact several lenders for each loan. The software also works with Pedestal.com and Ultraprise.com, two sites that sell loans to Wall Street, to price the loan and makes it immediately available for sale, Creamer said.
“We built our technology around the pain and troubles of being a mortgage broker,” Creamer said. He noted that 70% of mortgages still are done through traditional mortgage brokers.
Creamer and Homer developed the concept for the software, but hired Ryan Piwonka as chief information officer to develop it. Piwonka previously designed automated flight control systems for the Air Force. The software, Approval Finder, will be launched in November. The company has 12 developers working on the program, but the company wants to eventually have 40 on staff.
“We are only on version 1.0,” Creamer said.
LoanGenie is looking to land $25 million in a funding round headed by CIBC Capital Markets so it can continue the development of its software and hire more employees. Creamer said CIBC valued LoanGenie at $60 million to $100 million.
Creamer said the company should get that second round in November and is looking for $1 million to $3 million to see it through the next few weeks.
The software has attracted interest ahead of its launch, Creamer said, including inquiries from Fannie Mae and Home Advisor, the online mortgage division of Microsoft Corp.
Other companies, such as IndyMac Bancorp Inc.’s LoanWorks and LoanTrader Inc., both in Irvine, are developing similar offerings.
Creamer said he expects to conclude a deal in the coming days with an Orange County bank, which could bring in about $1 million annually. LoanGenie also signed a deal with Lion Inc., an online mortgage site, to use the technology, Creamer said, but he did not put a value on that contract.
The company also went through a recent shakeout in which 35 of its employees left when a group of managers quit.
“We had a management team in place that had an agenda that wasn’t in line with the company,” Creamer said.
Among those who left was Alan Stockton, a former executive at now-bankrupt subprime lender FirstPlus Financial. Creamer brought Stockton on to set up the sales and call center and bring in loan volume, but the two differed on how many loan officers they should have and how experienced the officers should be, Creamer said.
The company’s employment went from 85 to 50. Since the exodus, Creamer has brought employment up to 65 employees.
Creamer plans to take the company public or find a suitor in 18 months. “We’ll have to see what the appetite in the market is,” Creamer said. n
