Decoding Compliance

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feature ANALYTICS Or ig i nat ion Crowded House: s e r v ic i ng Social Funding's Future in Housing a na ly t ic s The crowdsourcing concept has risen to infamy on the Internet thanks to wildly popular platforms that let philanthropies, artists, and even small businesses raise funds via their social networks; and now, aspiring homeowners are applying the idea to collect money for mortgage loans. By Mark Lieberman the advantage of allowing folks with little savings and perhaps questionable credit the ability to buy something they can't afford on their own," cautioned Dean Caldwell-Tautges, VP of sales and operations at MortgageKeeper Referral Services. "We feel strongly that the primary owner ought to make some significant contribution upfront to the home purchase." "Instead of wedding gifts, we would prefer a donation to our down payment fund," they wrote on the site "We pretty much have everything we need to fill a house. We are looking to go on our honeymoon or use it to buy a house and start our life together." Their goal was a modest $7,500 and although they fell short, raising just $500, others have succeeded And while crowdfunding is not yet a threat to bank lending, it does provide individuals and families an alternative means of financing. It's also not new. Entrepreneurs are often advised to turn first to Crowd-Pleasing for Some, But Not All family and friends for startup money for new business ideas. And, most recently Chrysler unveiled a marketing campaign urging would-be car buyers to ask family and friends to chip in: have Grandma buy the tires, have Dad buy the engine and pretty soon all you have to do is get the keys and drive away. Crowdfunding may be gaining fans among buyers, but the real estate industry isn't necessarily onboard. The National Association of Realtors, for example, didn't even want to comment for this story. "Crowdfunding may have T he American Institute of Architects (AIA) recently produced a study on crowdfunding as a means of project financing. "Crowdfunding, also referred to as crowd financing or crowd sourced capital, is the practice of developing an online groupbased investment campaign to generate financing for a specific project," the AIA paper explained. "This practice leverages dedicated Internet fundraising websites to spur community support and financing for an assortment of ventures, including architectural, through numerous small-dollar investors." Crowdfunding in the AIA model is more than a means of raising capital but a way to demonstrate support for a project, which, because it is innovative, might not attract traditional investors or backers. "Crowdfunding, like any financing drive, possesses liabilities based on the nature of the project, generated interest, and economic climate," the AIA study cautioned. "What distinguishes crowdfunding is that it innately encourages communitybased investment in projects that have a collective goal and shared regional interest." The campaign for crowdfunding takes the concept of seeking financing from friends and family one step further, reaching out to friends of friends and friends of family. "Real estate is a physical, fiscal, and emotional asset that is necessary for every business, individual, and government to accomplish its goals," said Elizabeth Smith Kulik, cofounder and CEO of ProHatch, a The M Report | 63 se c on da r y m a r k e t W hen Tim and Imelda Newbold of Dallas married and wanted to buy a home, they skirted the traditional path to raise their down payment and instead turned to an increasingly popular means of raising money: crowdfunding—soliciting no-strings attached contributions not only from family and friends but in some instances from complete strangers.

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