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Executives at DriverUp told Reuters that the
company is expecting to sell at least $50 million of auto loans
to funds, wealthy individuals and other investors through its
website this year.
DriverUp's parent, Dallas, Texas-based Sierra Auto Finance, will
make all the loans on the platform at first, but Chief Executive
Sam Ellis said that over time other lenders may sell their loans
via the site. Before starting Sierra in 2012, Ellis founded
Exeter Finance Corp, a subprime lender acquired by Blackstone
Group LP in 2011.
Banks and investors have poured money in auto loans in recent
years after losses on mortgages and credit cards during the
financial crisis made many lenders skittish about expanding in
those areas. Consumers took out $105 billion in auto loans in
the third quarter, the most in any quarter since 2005, according
to the Federal Reserve Bank of New York's quarterly report on
household debt and credit.
Websites that allow investors to fund consumer loans, including
sites like LendingClub Corp, extended $9 billion of loans in
2014, nearly triple the volume of loans made in 2013, according
to estimates from credit-rating firm DBRS.
Unlike many other sites, the loans that DriverUp is making and
selling will be backed by borrowers' collateral.
The auto finance market's fast growth has been accompanied by
increased scrutiny from regulators and law enforcement
officials, especially around whether investors in bonds backed
by auto loans received adequate disclosure of their underlying
quality.
Ellis said that although regulators pose the greatest risk to
DriverUp's business model, loans on the platform will offer much
more information to investors than bonds backed by the loans,
including a verified credit analysis for each individual
borrower.
(Reporting by Peter Rudegeair; Editing by Cynthia Osterman)
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