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Alliance uses Internet to build its base

By Jeff Shuttleworth

If you have credit problems, Sean Saed is the man to see.

Most lenders won’t touch would-be home borrowers who lack squeaky-clean histories, but Alliance Mortgage, Saed’s Hayward-based online mortgage firm, caters to people with bad credit, people he describes as “Fannie Mae fallouts.”

“People in blue collar or middle class America are the people we work for,” said Saed. “They make up 80 percent of the adult population and they are the ones who are most affected by credit problems,” he said.

Saed charges that 75 percent to 80 percent of borrowers nationally don’t qualify for prime loans because of a rigid grading system invented by the nation’s few credit bureaus.

“This grading system is cold, impersonal and penalizes applicants for everything from divorces to job layoffs or simply being late on a credit card payment,” he said. “There are more than 50 ways to report negative credit and only a few ways of reporting good credit. Credit bureaus keep negative credit information on your record longer than they keep positive information, so people keep getting denied loans long after their problems are solved.”

Saed speaks from experience. A former real estate broker, an illness forced him out of work in 1986 and he landed in what he calls “credit hell.” He was unable to buy a car or rent a place to live, let alone get a mortgage.

His experience led him to found Alliance in 1992 in an effort to balance the loan application odds for others.

Alliance went online in 1996 and now competes against firms such as E-Loan Inc. of Dublin, FiNet.com Inc. of Walnut Creek and San Ramon, Mortgage.com and Rock Financial Corp.

“We’ve been able to sustain profitability for three consecutive years and have had a steady upward growth pattern without outside funding, without an IPO, without 200 employees and without being a bricks-and-mortar operation which just recently joined the Internet frenzy,” Saed said. Alliance has financed all growth and investment from current cash flow, he said.

Alliance uses advanced Internet technology to combine all loan services at a centralized location, enabling it to offer loans that Saed says are less expensive than those offered by traditional mortgage brokers, banks and financial, as well as those offered by similar Internet-based companies.

Because of the Internet, Alliance now provides loans across the country and 80 percent of its business comes from outside California.

“We’re not dependent on any regional ups and downs, so it makes our business very stable,” he said.

Now that more middle-class wage earners are going online, Alliance is seeing its loan activity increase while some leading online sites are seeing their business slow, Saed said.

Despite a drop in business at some other sites, don’t expect competition to wane. Rival FiNet.com spokesman Steve Pate said his online lender has “a loan product for everyone” and welcomes business from disadvantaged home buyers.

“We have alternative lending products and will work with them,” he said. “We don’t specialize in any particular type of loan product.”

Long-term, Saed hasn’t ruled out going public. But he said he is sobered by the experience of some companies, specifically mentioning E-Loan, whose stock price went as high as $74 a share after it went public in June but has now dropped below $20. And he’s afraid of losing control to venture capitalists.

“My creativity probably would be stifled,” he said. “We have offers on our table, but I have resisted,” he said. “It’s a devil’s choice. The dilemma is very heart wrenching.”

Reach Shuttleworth at jshuttleworth@amcity.com or 925-598-1432.

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