Buying a distressed loan isn't usually considered similar to trolling for discounted airfare.
But a new service to be launched Monday by a company known more for deposit insurance products is attempting to bring the often disjointed market for unwanted credits and bank-owned properties into the digital sphere.
Promontory Interfinancial Network is unveiling Bank Assetpoint, a Web-based listing service of primarily commercial real estate assets that will attempt to give banks greater and more automated access to potential buyers and real estate service providers — not to mention new loans for their portfolio — outside their local markets.
"It's built for the banker and it's built for a national platform," said Richard Walter, the former head of a leading national real estate investment firm whom Promontory hired to oversee the new service. "It's [now] very hard for buyers to find assets. It's hard for brokers to find bankers. We think we've accomplished the ability to … see the visibility of these assets in one place."
Other online services have emerged in recent years to help investors find a deal on banks' distressed assets. Some companies have offered tools to facilitate online auctions for real estate-owned properties. Buyers looking for bank-owned, residential properties can also access sites such as REOdeedwagon.com, created by the North Carolina Bankers Association.
But Promontory executives say the new service, which is already being promoted by both the American Bankers Association and the Independent Community Bankers of America, is unique.
Bank Assetpoint will focus on CRE-related assets, including REO, though the company plans listings for non-real estate loans. (Single-family residential loans for properties are not included.) The site is non-transactional, instead allowing buyers and sellers to find each other. It also allows banks to search for brokers, loan-sale advisors and other third-party providers, and includes a list of third-party firms that Promontory has validated. Additionally, the site facilitates secure exchanges of non-disclosure agreements and asset-related documents between parties.
Mark Jacobsen, Promontory Interfinancial's chief executive, said in developing plans for the service the company discovered how despite the large-scale asset disposition stemming from the crisis, bankers and real estate investors and brokers are still feeling each other out.
"We're trying to bring two industries together that have been apart," Jacobsen said. "From brokers we've heard that banks are very tough to market to, largely because they're fragmented and all over the place. Bankers have told us they don't know who to trust. After every call report, they get a call from 12 to 18 to 24 brokers. They don't know which one to trust. … Both sides are kind of at loggerheads."
The site itself has elements of various online retailers, listing services and airline ticket aggregators such as Kayak. The welcome screen features the service's approved "participants and providers." Potential buyers can enter search data for commercial properties, newly originated loans or more established credits, and sellers can create new listings. Visitors can then be directed to details about an individual asset, such as the unpaid balance for a CRE loan and details about the property like the amount of rooms and other characteristics of an operating hotel, for example.
In addition to banks' continued interest in disposing of legacy assets from the crisis, Jacobsen said he hopes the service will also be utilized for the sale of performing assets that a lender simply wants to unload.
"We do hope that in time bankers come to see this as a good place to buy and exchange newly originated loans, which banks are having a tremendous difficulty doing," he said.
The site is designed primarily to assist banks in connecting with brokers and investors, yet participation in posting listings is not limited to depository institutions, potentially including nonbank lenders. Potential buyers, meanwhile, can include lenders, brokers and serious investors, but it will not be open to members of the public. "The average Joe retail investor is not going to be invited," Jacobsen said.
Access to the site for approved participants is free. But after a year of operation, Promontory will begin to charge posting fees for the listing of assets that were originated after the financial crisis (Posting assets that were originated before the crisis will always be without charge, Jacobsen said, recognizing banks are already likely to take a loss on them).
Sellers of REO will be charged a flat fee just for posting a listing. The fee structure related to still-existing loans is more complicated, with the company planning to charge fees based on a basis-point spread charged to the seller only after the sale has occurred. Promontory anticipates it will not make a profit on the service in as much as five years of the site being launched. (Over a thousand listings are already expected to be advertised when the site becomes active on Monday.)
"On the loan side, we'd like to have it be a spread contingent on a successful transaction," Jacobsen said.
Bank Assetpoint is something of a departure for the firm that to date is well-known in the banking industry for products allowing institutions to give customers extra deposit insurance beyond the federal protection limits. Promontory Interfinancial's Certificate of Deposit Account Registry Service — or CDARS — allows banks to spread a depositor's funds out into increments of CDs placed at numerous member institutions.
The company and industry representatives say Promontory's established record related to deposit-related products with the industry — especially community banks — could give it a head start in establishing a service for banks' asset portfolios.
"They have a ready group of banks ready to look at it, whereas other types of these platforms out there for bank-owned real estate were being offered by businesses that didn't really have much of a client base to begin with," said Dan Clancy, executive vice president of services at ICBA. "[Promontory] can build the market probably more quickly than other services we have seen out there."
Lisa Gold Schier, senior vice president for strategic alliances for the ABA's Corporation for American Banking, said Bank Assetpoint should give institutions a more sophisticated approach to disposing assets.
"Banks were doing some of this on their own," she said. "If they had a property, they might put it in the classifieds or try to get it out word of mouth or maybe put it up on their website and hope that somebody would see it. By going through Bank Assetpoint, they open themselves not only to the people they might already be working with within their local market, but to a much broader stream of individuals and brokers and bankers who can now see the properties. It takes it from a more localized marketplace into this national scope."