Danville, Calif. and Los Angeles (PRWEB) August 17, 2009
In an effort to answer the vexing question of how financial institutions can price troubled assets, DebtMarket (http://www.debtmarket.com) launches today as the world’s first automated marketplace that connects buyers and sellers of loan portfolios.
DebtMarket enables an estimated 60,000 loan originators (primarily banks, credit unions and finance companies) and portfolio owners (primarily institutions, hedge funds and private equity investors) to list loans from the major consumer loan asset classes, including automobiles, mortgages and student loans. In the months ahead, the company also will support credit card portfolios and other asset classes. DebtMarket accepts loan portfolios of any size, credit quality and loan performance.
DebtMarket enters a market that is measured in the trillions of dollars. Total U.S. revolving and non-revolving consumer debt, including mortgages, was more than $ 14 trillion at the end of 2008, according to the Federal Reserve. DebtMarket also has the potential to play a role in helping both the federal government and the lending industry price hundreds of billions of dollars in troubled assets. Clearer market pricing results in greater market liquidity and efficiency.
The company also announced it has tapped Intel’s former research director as CTO and enlisted several top consumer finance leaders for its advisory board [see the news release, “DebtMarket Attracts Leaders in Technology, Financial Services”].
“DebtMarket is a solution to the credit crisis, applying game-changing technology to provide a transparent, efficient, standardized platform that financial institutions and institutional investors anywhere can use to price, purchase and sell debt,” said DebtMarket Founder and Chairman Scott Walchek. “DebtMarket transforms the existing secondary debt market – much as eBay transformed the auction marketplace – by making it easy for institutions and institutional investors of all types and sizes to participate.”
A serial entrepreneur who has created, led and/or funded an impressive roster of highly successful start-up companies, Walchek has been an innovator in educational video games, a pioneer in Internet shopping cart technology, and was among the first to see the search technology opportunities in China with Baidu. “Technology is the gateway to transparency, and transparency is the tonic that has the power to re-ignite the economy,” Walchek said. “The world’s first automated portfolio marketplace, DebtMarket is the antidote to traditional opaque loan sale methodologies that talk about transparency but fail to deliver. We see DebtMarket as an ideal tool for regulators seeking to expedite the clean-up of toxic bank assets, especially for those small- to mid-size institutions that previously have lacked a marketplace for their loans.”
DebtMarket enables participants to establish and negotiate pricing, perform due diligence and complete all the paperwork needed to close the transaction. The end-to-end transaction technology eliminates inefficiencies, reduces costs, and invites participation from buyers and sellers regardless of size, geography or other previous barriers to entry. DebtMarket technology delivers transparency through a series of essential elements: an auction-style marketplace for competitive pricing; loan-level detail; direct contact between buyer and seller; a visible next-step process in the transaction; and a published fee structure.
“DebtMarket has the potential to transform the way institutions and institutional investors buy and sell consumer debt,” said Mike Sheridan, Co-founder and President of DebtMarket. “DebtMarket acts as a market stabilizer by providing access to buyers and sellers beyond companies’ traditional reach. This helps address the ‘price discovery’ problem that historically has discouraged so many small- and medium-size institutions and new investors from participating. DebtMarket’s disruptive technology pushes the envelope by handing control to buyers and sellers, which results in greater transparency.”
Industry observers suggest that DebtMarket will initially attract buyers and sellers of distressed debt, but that demand for a full-spectrum, technology-enabled solution is likely to extend to the market as a whole.
“The market today is distressed, with assets being sold at a discount — and that’s where an online marketplace like DebtMarket will generate its early successes,” said Jim Jones, former CEO of Residential Capital, Inc. (ResCap), the real estate finance arm of GMAC, and one-time head of consumer credit at both Bank of America and Wells Fargo. Historically, securitization has provided debt originators and portfolio investors with the information they required to make a buy/sell decision. “The difference today is there is no securitization taking place,” Jones said. “The DebtMarket platform assimilates the same type of information buyers and sellers need and provides it via a transparent medium. The result is that buyers and sellers can be more confident that their bid will be evaluated on an equal footing with others. That’s what transparency is all about.”
Walchek and Sheridan began testing the DebtMarket model in July 2008, when they launched a beta to address a single asset class – auto loans. Since then, GDNAuto has transformed the way auto dealerships and financial institutions trade as much as $ 30 billion a year in subprime auto debt. The platform’s success within the auto finance realm has led to a number of significant partnerships between the newly dubbed DebtMarket and auto finance institutions and affiliated service companies.
That continues today with the announcement of a definitive agreement with Frazer Computing, Inc., a Canton, N.Y.-based provider of dealer management software, to incorporate certain features of the DebtMarket platform into its dealership offerings. Frazer is one of the industry’s largest DMS providers, with 4,700 active users, most of which are independent dealers [see the news release, “DebtMarket Signs Partnership Agreement with Frazer Computing”]. DebtMarket said it intends to pursue similar relationships across the broad consumer credit landscape.
DebtMarket (http://www.debtmarket.com) is the world’s first automated marketplace that connects buyers and sellers of loan portfolios. The innovative DebtMarket technology platform delivers price transparency, process automation and direct buyer/seller communication in a secure online environment.