Owning a home is one of the most rewarding and empowering things many Americans will do in their lifetime.
Our home is not just where we raise our families, but it’s also where we build the wealth to send our children to college, start a new business or retire. It’s at the heart of the American dream.
But for too many, financing that dream has become a nightmare. Securing a basic mortgage can take over 45 days and cost as much as $15,000 in fees and commissions. Homebuyers are left feeling confused, frustrated and scared at the end of what should be an empowering process.
Clearly something isn’t working.
The Mortgage Industry Is Broken
Creating a mortgage is in fact a significant undertaking, both for borrowers and lenders. Capital providers and regulators require a significant amount of information, verification and disclosure to ensure a borrower has the ability to pay back the loan.
And with good reason. The financial crisis of 2008 showed us what happens when credit flows carelessly. For too many years, lenders cut corners and chose to innovate on creative loan products rather than modernizing their systems. And the American people suffered the consequences. Millions of families lost their homes. Millions more suffered from the weight of loans that they didn’t understand and couldn’t afford.
Many of us were on the frontlines of that crisis. We saw up-close a housing finance system built on short-term thinking and antiquated, manual processes. A system that struggled to modify or refinance existing loans. A system full of jargon, middlemen and paper. In short, a system focused on making loans, not helping borrowers.
Important reforms were implemented to curtail the most significant abuses, but we were frustrated by our inability to promote fundamental change in the lending process. We realized, however, that technology could cut waste across the entire lending value chain and create a borrower experience that is understandable, manageable, and significantly more affordable.
We’ve seen important early innovations in consumer finance — but they haven’t gone far enough. While new lenders have transformed personal loans and student loan refinancing, core sectors of consumer lending remain largely the same. For most middle class borrowers, little has changed.
This is especially true in the $10 trillion mortgage market, where government-subsidized financing is abundantly available. We don’t need new sources of capital, we need a better way to access it. Amazon changed the way consumer goods are delivered by reengineering the entire retail supply chain; we can do the same for mortgage finance.
The magnitude of the challenge requires a holistic approach. It isn’t enough to innovate around the application or the pre-approval process or to create better underwriting or credit risk assessment tools. We need to take responsibility of the entire lending process if we’re going eliminate cost and confusion for the homeowner.
And that’s what we are doing at Clara.
We’re Here to Fix It
We’ve brought together a unique team with diverse backgrounds in technology, design, finance, and public policy to build a modern mortgage bank from the ground up. We’re re-imagining how lending can and should work, simplifying the origination process, lowering borrowing costs, and making the U.S. mortgage finance system more transparent and stable.
Today, we are lending in California, and will expand nationally in 2017. To date, we’ve raised $27mm in equity financing from lead investors Redpoint Ventures and Venrock, as well as a group of industry experts, entrepreneurs, and executives. We’re thankful for the support our growing team of 60 has received from family, friends, advisors, and investors who, like us, believe that there has to be a better way.
one of our licensed Loan Specialists. Or get your personalized rate quote completely online in about 3 minutes.
This is only the beginning of a long and exciting road for us, and we’re motivated by the challenges ahead. We’re also hiring: if you’re driven by a mission to empower consumers while doing meaningful work, we want to hear from you.
If you have any questions, you can chat with one of our licensed Loan Specialists. Or get your personalized rate quote completely online in about 3 minutes.
Jeff Foster & Lukasz Strozek