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Looking at last year’s numbers, digital mortgage company Better looks like a shell of its former self, when its smooth process fueled exponential growth during the pandemic as homeowners rushed to refinance.
Reporting Profit in 2023 On Thursday, Better revealed that it funded just $3 billion in mortgage loans last year, about 5% of the $58 billion in loans it made in 2021 at the height of the refinancing boom.
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But in a conference call with investment analysts, Better CEO Vishal Garg expressed optimism about the future and said the company has made fundamental changes to its business model that will help it pivot to offering homes to homebuyers. loan.
The changes include hiring more experienced loan officers, signing more B2B partnerships (such as a recent initiative with Bed Bath & Beyond parent company Beyond.com), hiring and training real estate agents to represent buyers Make mortgage loans (an emerging program called “mortgage lending”). “The better duo”).
Better cuts 2023 losses by 39%
Source: Better Home Financial Holdings Inc. earnings report.
While Better lost $534 million for the full year, most of the losses came in the third quarter, when Better lost $340 million. After laying off thousands of employees and cutting $1.1 billion in annual expenses since 2021, Better’s net loss in 2023 fell 39% from the same period last year, while its net loss in the fourth quarter was $59 million, down 83% from the third quarter .
Vishal Garg
“Over the past two years, we have been focused on significantly reducing expenses and maximizing corporate efficiencies in a very challenging macro environment,” Garg said on a conference call with investment analysts. “The mortgage market is beginning to shift. The signs mean it’s time for us to thoughtfully pivot to growth to ensure we’re ready when consumer demand returns and to ensure we capture greater market share in purchases, refinances and HELOCs.”
Despite continuing to lose money, Better still has some room for maneuver. After going public in August, by completing a merger with a special purpose acquisition company (SPAC), by the end of this year, Better received $554 million in cash, restricted cash and Short-term investments.
Shrinking mortgage lending shifts to homebuyers
Source: Better Home Financial Holdings Inc. earnings report.
While Better expects to do more business in 2024 while keeping spending consistent with 2023, the company won’t ramp up purchase mortgage originations as quickly as it ramped up refinances during the pandemic.
As mortgage rates fell to historic lows, Better’s mortgage origination volume increased nearly fivefold to $24.2 billion before more than doubling in 2021 to $58 billion.
As mortgage rates rebound, that growth has slowed even faster, to $11.4 billion in 2022 and $3 billion last year.
Better said it funded just 1,633 mortgages totaling $527 million in the final three months of 2023, and expects the number of loans funded in the first quarter to be between $600 million and $650 million.
Turn to homebuyers
Refinances accounted for just 7% of Better Financing’s loan volume last year, with homebuyer mortgages accounting for 91% of the company’s business and home equity lines of credit (HELOCs) making up the remainder.
Better believes hiring experienced loan officers on a commission-based compensation plan — a “significant departure” from the company’s original model — is critical to doing more business with homebuyers.
“We are pleased to see early conversion improvements from this operating model shift and the experienced sales talent we are hiring, as well as greater consistency between our volumes and costs,” the company said in its earnings report. “
While the vast majority of Better’s refinancing business is “D2C” (direct-to-consumer), it has become more reliant on its “B2B” (business-to-business) partnerships.
Better has had a strategic partnership with Ally Bank since 2019 and in November announced a partnership with Infosys to launch a white-label “mortgage-as-a-service” platform for lenders.
In the first quarter, Better established a partnership with Beyond.com, which owns brands such as Overstock, Bed Bath & Beyond, Baby & Beyond and Zulily.
Beyond.com customers can now Buy a mortgage with Betterearn those who take out a loan a free year of membership in the company’s Welcome Rewards program and up to $500 in Welcome Rewards points to spend at Bed Bath & Beyond.
Garg said Better is also committed to growing its real estate agent relationships “because they are key to the consumer experience.”
Even better is to partner with local agents and other local service providers who are involved in the home buying process and bring them into a better ecosystem.
Better to hire a real estate agent to originate loans
Better Duo is currently available in 26 states and Washington, D.C. Source: better mortgage.
One way to do this is through a file called better duo. In states where it is allowed, Better is hiring real estate agents who work with buyers as W-2 employees and helping them obtain dual licenses that allow them to originate mortgages.
While the program is just getting started, Better Duo now has 48 producing real estate agents and mortgage originators, up from 12 in the fourth quarter of 2023, Garg said.
“The fact that we have real estate agents signing up as loan officers on our platform shows how advanced our platform has become for purchasing mortgages,” Garg said. “We built it from the ground up. There just wasn’t a retooling product that was reconfigured to make purchases. We built a product that real estate agents are adopting and saying, ‘Yeah, I want to be a loan officer on this platform.'”
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