New Peer-To-Peer Trend: Direct Home Loans

NEW YORK (MainStreet) — Trouble abounds in the U.S. economy, and in the nation’s long-suffering housing sector.

Moody’s Analytics is out with a research note downgrading the strength of the U.S. economy, curbing its second-quarter gross domestic product estimate to a paltry 1.9%.

"Even with the downgrade the risks to the forecast are to the downside and center on the possibility that businesses could pack it in as a result of heightened uncertainty," explains Moody's economists Aaron Smith and Ryan Sweet, in the note.

You don’t need be Ben Bernanke to figure out that’s not good news for the U.S. housing market.

Low economic growth is to bank lenders what wolfsbane is to werewolves – it keeps them out of circulation and extremely reluctant to make home loans to consumers looking for new mortgages.

But economics – like nature – abhors a vacuum, and that’s where real estate peer-to-peer loan companies leap on to the stage.

Peer-to-peer lenders look to bypass traditional lending sources (namely banks) and connect private lenders to qualified buyers directly. To date, that usually has meant small loans for things such as cars or modest home remodeling projects – you know, those loans banks used to make on a wide scale basis every day.

Industry figures show P2P lenders have made $1 billion in direct consumer loans through May (the industry launched in 2006). Now P2P lenders are venturing into the real estate market, with Ladera Ranch, Calif.-based Money 360 saying it has the first large-scale real estate-based P2P program in the U.S.