I feel like the Crowfunding companies ability to organize and qualifiy borrowers is much more of a factor than what the borrower spends it on.

This means that they will depend on your stable job and good credit as signs of a good (and probably repeat) borrower.

Why don't the home owners borrow against their equity or sell their house and pay the back taxes prior to the sheriff sale?

In addition, even though he is a good paying borrower, if he constantly over the life of his credit or recent past, refinances the scoring will reflect that trend.  

I will walk through the scenario presented above to show how I would analyze this.In this scenario, we have a borrower that is considering paying a higher interest rate to get rid of PMI expense.  

Purchased on Auction for $84,000rehab est $44,000est ARV $200,000no money borrowed as of yet. 5 bed/ 3/bath 1 FP 2325 sf with formal, den and large kitchen

From the borrower's point of view nothing has changed. 

Did you borrow a total of $340K at 4% to buy and complete the rehab?  

So the deal can be overpriced depending on who is on the lease.Some private sellers do not want to take the risk of underwriting a borrower and the loan falls through.

These institutions play the role of the investor and insure the bank that is lending credit a method of compensation as long as the loan has been underwritten correctly and closed legally regardless of whether or not the borrower defaults on it years later.