IMX Exchange, the on-line bidding system for mortgage brokers and lenders, has secured an additional $22 million in backing from investors, bringing its war chest to $40 million.
The investors in the San Ramon, Calif.-based company, whose system enables originators to lock in residential mortgage loans over a computerized network, are led by Lehman Brothers and include Citicorp Inc., BancBoston Capital Inc., and Presidio Venture Partners.
Investors that participated in the company's latest round of capital raising include Mohr, Davidow Ventures; Technology Crossover Ventures; Piper Jaffray Ventures; Hummer Windblad Venture Partners; and Intel Corp.
John Hummer, IMX president and chief operating officer, said the extra financing will enable the company to expand nationwide within six months, beyond its California base.
The company's services have been on-line for about 15 months and have generated more than $1 billion in mortgages.
Mr. Hummer said his company offers protection to mortgage brokers, who face a competitive threat as potential customers surf the Internet.
"There is incredible pressure on brokers from on-line consumer sites that are trying to cut out the broker function, in conjunction with banks that are trying to do the same," Mr. Hummer said. "We want to protect originators because they provide an incredible service to consumers. For example, if you are looking for a loan but just lost your job, you probably won't put that on a consumer site-but you might very well be qualified for a loan if a broker could just explain your circumstances to a lender."
Mr. Hummer said that a high proportion of loans in the system actually go to closing, because lenders can enter specific queries and bid only on loans they are likely to accept.
"If a broker accepts a bid, it will usually close on this system," Mr. Hummer said. "A lender can bid (only) on loans with Fico scores of 780 if he wants to. This is so different from the traditional system, because lenders do not have to pore through masses of queries."
Mr. Hummer said the company will not seek more investors.
"We are very well funded and are here forever now," Mr. Hummer said. "We have all the money right now that we need to grow."
Derek Proudian, a general partner at Mohr, Davidow Ventures, one of the original IMX investors, said his venture capital firm helped IMX reach critical mass in the mortgage market. He added that the search for investors lasted six to eight weeks from start to finish.
"You have to have enough buyers and enough sellers to create a liquid market if you want to participate," Mr. Proudian said. "There were more people who wanted to invest than we had room for. We only wanted to raise $20 million in this round, because that is what we felt we needed to grow our company to the size to make it a public company."
Mr. Proudian said that financing a home is typically the biggest financial transaction in a consumer's life, and that his company believes the broker function is crucial.
"Our plans are very aggressive, and that is the reason we have raised this capital," Mr. Proudian said. "Our plan is to have a broker presence in all 50 states."
Mr. Hummer said expansion will include a significant amount of marketing, as well as national distribution of free system software.