NEW YORK–(BUSINESS WIRE)–Better Home & Finance Holding Company (NASDAQ: BETR), a leading digital homeownership company, today launches Better Mortgage VA Loans, a fully digital VA loan program available to eligible US Veterans, service members, National Guard and Reserve members, and in some cases Veterans spouses are able to qualify in all 50 states. This offering allows qualified Veterans to secure a home loan for up to 100% of their purchase price with no down payment requirement, improving the homeownership experience for individuals who served their country. With Better Mortgage, Veterans can leverage a fully digital platform to achieve their homeownership dreams faster and easier than the traditional mortgage process.
“Better has brought the traditional mortgage into the digital era, launching our 1 Day Mortgage Product and funding over $100 billion of fully digital mortgages. With Better’s VA Loans, we are opening the door for even more hardworking Americans who have served their country to achieve the American Dream of homeownership,” said Vishal Garg, Founder & CEO of Better.
Better’s VA loan will have no minimum down payment requirement for qualified borrowers, opening the door for aspiring Veteran homebuyers that may have previously been priced out. Veterans can use a Better VA Loan to purchase a primary residence and will allow them to borrow up to 100% of the purchase price (dependent on available eligibility and borrower qualification).
The launch of their fully digital VA Loan is the latest example of Better’s continued commitment to investing in technology and automation. VA Loans are fully underwritten to the investor criteria set forth by Better’s investors and the VA. Additional details on eligibility requirements can be found on VA.gov. To apply for Better’s VA Loan offering, please visit www.better.com/va-loan.
About Better Home & Finance Holding Company
Since 2017, Better Home & Finance Holding Company (NASDAQ: BETR) has leveraged its industry-leading technology platform, Tinman™, to fund more than $100 billion in mortgage volume. Tinman™ allows customers to see their rate options in seconds, get pre-approved in minutes, lock in rates and close their loan in as little as three weeks. Better’s mortgage offerings include GSE-conforming mortgage loans, FHA and VA loans, and jumbo mortgage loans. Better launched its “One-Day Mortgage” program in January 2023, which allows eligible customers to “go from click to Commitment Letter” all within 24 hours. From 2019-2022, Better completed approximately $98 billion in mortgage volume and $39 billion in coverage written through its insurance arm, Better Cover. Better was named Best Online Mortgage Lender by Forbes and Best Mortgage Lender for Affordability by WSJ in 2023, and ranked #1 on LinkedIn’s Top Startups List for 2021 and 2020, #1 on Fortune’s Best Small and Medium Workplaces in New York, #15 on CNBC’s Disruptor 50 2020 list, and was listed on Forbes FinTech 50 for 2020. Better serves customers in all 50 US states and the United Kingdom.
Eligible U.S. veterans, service members, National Guard and Reserve members (and in some cases, veterans’ spouses) can qualify in all 50 states for up to 100% of a home’s purchase price with no down payment. Better’s rate for VA loans was 6.375% as of Tuesday afternoon, the company said.
Garg expects that “a large percentage” of VA loan applicants through Better will also be able to qualify for the company’s One Day Mortgage program, which was launched a year ago and allows customers to apply for a mortgage, get preapproved, lock their rate and receive a commitment letter within 24 hours. Garg said this will be one of the company’s competitive advantages in the VA space.
Conventional loans account for 95% of Better’s portfolio, with the remaining 5% tied to other products such as jumbo loans. The lender’s overall production fell from $57 billion in 2021 to $11 billion in 2022. In third-quarter 2023, it posted mortgage volume of $731 million, down from $900 million in Q2 2023 and $1.1 billion in Q3 2022.
“VA loans are 12% of the mortgage market,” Garg said. “So, we are hoping that we can get to the industry average, at least having 10% of our volume to be VA loans in 2024.”
Better has a small team of employees dedicated to VA loans, which Garg said will grow in correspondence to the company’s market share in the segment. He did not disclose the current size of the team. The VA team reflects a different strategy for the company when hiring employees, Garg added.
“More recently, we’ve been hiring loan officers, processors and underwriters as the company has been starting to grow,” Garg said. “The loan officers we’ve been hiring are industry experts that we’ve been bringing onto our platform, rather than the traditional noncommissioned loan officers that we used to hire in the past and who used to be usually people who had never worked in the industry.”
Better had to adapt its operations to a different workflow for VA loans, which have different forms, including veteran status checks. The company will target customers online and via social media to work with its fulfillment center. The plan is to distribute the product through its network of partners as it scales.
Looking ahead, Garg expects the Tinman platform to expand to Federal Housing Administration (FHA) loans, nonqualified mortgages (non-QM), home equity lines of credit and other consumer finance products unrelated to home lending.
Better Home & Finance Holding Co., the parent of Better.com that went public in late August, is struggling financially. The company posted a loss of $340 million in the third quarter. Its stock was trading at $0.58 on Tuesday afternoon and the company is at risk of being delisted at Nasdaq. Garg declined to comment.
“All I can say is that it’s great to have over, you know, the $530 million of new capital that we raised; it is incredibly powerful in a market where mortgage companies are very thinly capitalized and don’t have the room to invest in growth coming ahead,” he said. “And so we’re very excited for what is coming next.”
New York-based digital lender Better Home & Finance Holding Company has partnered with information technology consulting company Infosys on a mortgage-as-a-service platform.
The integrated end-to-end digital mortgage white-labeled platform aims to cut origination costs and helps partners limit operational volatility in the current interest rate environment, Better said Thursday in announcing the launch.
“Better’s mortgage as a service platform is the first full-stack, end-to-end solution that handles all aspects of the mortgage process including point of sale, pricing, underwriting, loan origination, closing, funding and investor sale,” Vishal Garg, CEO and founder of Better, said in an e-mailed response to HousingWire.
Better’s mortgage as a service currently consists roughly 20% of its revenue and the lender aims to grow this business line, Garg said.
The partnership with Infosys is in line with Better’s new strategy to become a leading mortgage-as-a-service company or a white-label provider of mortgage technology.
Before Better debuted on the Nasdaq after a two-year journey in late August, the digital lender strived to be a one-stop shop where the firm does everything in-house. Prior to its initial public offering (IPO), Better shifted its strategy to doing only what its best at in-house and partnering with other businesses for the rest.
The company’s latest efforts to become a digital homeownership company includes the launch of Better Insurance.
The white-label solution eliminates redundancy and offers competitive pricing for customers without engaging with insurance agents, said Nick Taylor, head of real estate at Better.
When a buyer applies for home insurance, Better Insurance asks questions about the type of property and estimated home sales price, then the firm provides customers with a preview of insurance options.
The digital lender reported a net loss of $45.5 million in Q2, an improvement from a net loss of $89.9 million the previous quarter.
Better’s origination volume was $900 million across 2,421 loans in the second quarter of 2023, compared to production of $800 million across 2,347 loans funded in the previous quarter.
Better ranked as the 62nd largest mortgage lender in the first half of 2023, according to Inside Mortgage Finance.
The lender is scheduled to report its third-quarter financial earnings on Nov. 14.
Shopping for a mortgage has never been easier, thanks to the array of online options. Brick and mortar lenders may still be a viable option, but you may find that an online lender has even more to offer.
Furthermore, exploring online mortgage lenders allows you to compare mortgage rates. You can also receive customized mortgage loan offers in your inbox in minutes. Even better, you’ll have direct access to a loan officer in case you have questions.
Who are the top online mortgage lenders for 2023?
If you’re in the market for a new home and ready to start your search for online lenders, here are some reputable options to choose from.
Best Online Mortgage Lenders of 2023
loanDepot
loanDepot is an online lender, but don’t think that means they are lacking in customer service. They provide over 150 loan stores across the country for customers that prefer in-person service.
The lender is a suitable option for anyone who wants to take out a mortgage with the assistance of a loan officer.
loanDepot offers various mortgage products, including fixed and adjustable-rate mortgages. You can also apply for jumbo loans, VA loans, and FHA loans. You’ll need a minimum credit score of 620 to qualify for a mortgage.
loanDepot ranks high in customer satisfaction and most buyers seem to have a good experience working with them. However, they do charge higher fees than other mortgage lenders.
Quicken Loans
This online lender takes the hassle out of securing a mortgage by letting you complete the entire process online.
You’ll need to provide a few key details about your finances using this form to get started. A Home Loan Expert will review your application and contact you to discuss loan options.
And no need to worry about getting overwhelmed. Quicken Loans offers online tools to help you understand loan options and the home buying process. Plus, the customer service is excellent; a live representative is always standing by.
You can also upload all your documents and monitor the status of your application directly from the portal. This means you never have to pick up the phone if you don’t want to.
And when you’re ready to close, you have the option to schedule the closing when it’s convenient for you.
Better.com
If you’re looking for an online mortgage lender, you should check out Better.com. The company uses technology to simplify the lending process for its customers. Better.com promises a fast and transparent mortgage experience.
The lender is willing to work with all different kinds of buyers, including individuals who are self-employed or have unique job situations.
At least a third of its mortgages are taken out by first-time homebuyers, and over 70% of all buyers pay a down payment that is less than 20%.
Better.com mortgages don’t come with any hidden fees; there are no application or origination fees. To get started, you can visit the company’s website and get pre-approved in just a few minutes.
Rocket Mortgage by Quicken Loans
Rocket Mortgage is a division of Quicken Loans. Their key competitive advantage is the asset importer tool, which takes the guesswork out of determining whether you’re approved.
Instead of uploading documents, importing them from the information provider guarantees the accuracy of the numbers and allows you to receive loan offers using real-time interest rates in a matter of minutes.
And once you’ve selected a loan that works for you or created a custom option, you’ll be able to close in record time. Plus, Rocket Mortgage customer service experts are standing by to assist with questions you may have every step of the way.
NBKC Bank
NBKC Bank is not as widely known as many of the other lenders on this list. But that doesn’t mean you should rule them out as a potential mortgage lender.
There are several features that make the Kansas City-based lender a great option. The bank promises fast home closings and provides exceptional customer service.
NBKC Bank focuses mostly on online mortgages and offers its customers competitive interest rates. It does have several brick-and-mortar locations but focuses mostly on processing online mortgages.
You’ll need a minimum credit score of 620 to qualify for a mortgage, so this is a suitable option for borrowers with fair credit. NBKC Bank offers various mortgage products, as well as personal accounts. This makes them a great option for anyone looking for a full-service lender.
Guaranteed Rate
You can apply for a mortgage in a matter of minutes from the homepage of this digital mortgage provider’s site.
All you have to do is answer a few questions about your desired home, credit, and finances to receive a comprehensive listing of loan types and interest rates you may qualify for.
Guaranteed Rate has plenty of no-down-payment loan options like VA loans and USDA loans. They also offer a knowledge center to help you understand mortgages and how the process works.
Once you decide on a mortgage product that best suits your needs, you’ll work directly with a loan expert to upload and sign documents and finalize the loan. If you prefer to meet with a loan expert, there are 170 Guaranteed Rate branches across the United States.
Truist
Truist is known for its brick-and-mortar presence, but they also have an impressive online mortgage platform. Available in English and Spanish, Truist mortgage offers an array of mortgage solutions to choose from.
You can initiate the application process online or directly from your mobile device through the SMARTGUIDE tool.
You can also call 877-907-1020 to speak with a loan officer or chat online from the website. Or if you wish to meet with a loan officer, use the locator tool to find a Truist branch near you.
You can also take advantage of their Doctor Loan program if you’re a medical professional and meet select income criteria.
SoFi Mortgage
SoFi mortgage is another online lender that stands out from the masses. Although they don’t offer government-backed home loans, SoFi mortgage has programs that require a down payment as low as 10 percent, and they do not assess mortgage insurance.
Customers also enjoy a seamless prequalification and application process, along with no origination fees. Even better, it may be possible to close on your loan in under 30 days.
Penny Mac
If you’re searching for flexibility, Penny Mac may be the ideal lender for you. They offer several options to consumers of varying financial backgrounds. To date, they’ve served over 1 million customers and funded over $5 billion in loans in 2017, alone.
You can request a no-obligation free quote online, chat with an expert, or call (888)870-6229 to get started.
Reali
Crediful’s rating
Reali caters to consumers looking to purchase or refinance their homes. Through their Interactive Loan Dashboard, you can apply, upload any documents needed, and track your loan’s progress at the tap of a fingertip.
You’ll also have access to a Home Loan Advisor 24/7 to address any concerns you may have. And because of their streamlined process and low fees, you can expect to close in record time without spending a fortune.
Unfortunately, Reali does not offer government-backed products, like FHA loans, USDA loans, and VA loans.
This can be a turnoff to first-time, credit-challenged, or cash-strapped buyers.
Another major drawback is that they only operate in Arizona, California, Colorado, Florida, Georgia, Illinois, Michigan, Oregon, Pennsylvania, Texas, Virginia, and Washington.
The good news is they plan to expand their offerings to more states soon.
Pros and Cons of Online Mortgage Lenders
The rise of the internet has revolutionized many industries, and the mortgage industry is no exception. Online mortgage lenders have steadily been gaining a more substantial market share due to their distinct advantages. However, as with anything, they come with their own set of disadvantages. Here, we break down the pros and cons of opting for an online mortgage lender.
Pros of Online Mortgage Lenders
1. Lower Costs: Operating primarily online, these lenders often have fewer overhead costs compared to traditional brick and mortar lenders. This can translate into competitive mortgage rates and lower lender fees, making online mortgage lenders potentially cheaper.
2. Convenience: The ability to initiate and complete the entire application process online is a significant advantage. You don’t have to schedule meetings with a loan officer or travel to a bank branch. Instead, you can apply anytime, anywhere, which fits well with busy schedules and modern, on-the-go lifestyles.
3. Range of Loan Products: Online mortgage lenders often offer a broad range of loan products, including FHA and VA loans, USDA loans for rural properties, conventional loans, and jumbo mortgages. These lenders often cater to a diverse demographic, meaning whether you’re a first-time homebuyer seeking down payment assistance, a veteran, or someone with less-than-perfect credit, you can often find an online mortgage product that suits your needs.
Cons of Online Mortgage Lenders
1. Technological Hurdles: Not everyone is tech-savvy. If you’re not comfortable navigating online platforms or don’t have reliable internet access, you may find the online mortgage process daunting. The learning curve associated with digital platforms can be a deterrent for some people.
2. Lack of Personal Interaction: Some people prefer a high-touch, personalized service when dealing with significant transactions like buying a home. With online lenders, face-to-face interaction is usually minimal or non-existent, which can be a downside for those who prefer a more traditional approach to their financial transactions.
3. Negotiability of Fees: While online mortgage lenders are often cheaper, certain costs like origination fees and closing costs may not be as negotiable as they could be with a traditional lender. Also, mortgage insurance may still be required for government-backed loans, like FHA or VA loans, and the requirements for jumbo loans may be stricter.
4. Trustworthiness: The online space can be a breeding ground for scams and unscrupulous practices. Not all online mortgage lenders are trustworthy, making it crucial to do your homework. It’s important to research each online lender thoroughly, checking their reputation, reading customer reviews, and ensuring they are registered with appropriate financial oversight institutions.
Despite these potential downsides, many homebuyers find that the convenience, competitive rates, and the ability to shop around from multiple lenders offered by online mortgage lenders outweigh the cons. But the best online mortgage lender for you ultimately depends on your personal finance needs, comfort level with technology, and unique home loan situation.
Factors to Consider when Choosing an Online Mortgage Lender
Finding the right online mortgage lender for your home-buying journey involves more than just hunting for the lowest interest rate. You need to consider a variety of factors, from loan types to the speed of loan processing. Here’s a breakdown of what to look for:
Interest Rates
As a prospective borrower, interest rates are often one of your first considerations. The interest rate can significantly influence your monthly mortgage payment and the total cost of your loan. Due to their lower overhead costs, online mortgage lenders often advertise competitive rates. However, it’s essential to compare rates across different lenders to ensure you’re getting the best deal.
Fees and Hidden Charges
While interest rates play a crucial role in determining your loan cost, it’s equally important to consider fees and potential hidden charges. This could include origination fees, appraisal fees, closing costs, and other service charges. Some lenders may also charge additional fees for rate locks or early repayments. Always ask for a comprehensive cost breakdown and be wary of lenders who are not transparent about their charges.
Loan Types
Each online mortgage lender may offer a variety of loan types, such as FHA loans, VA loans, conventional loans, and more. Depending on your personal circumstances and needs, you might need specific loan products like USDA loans for rural properties, FHA or VA loans for a low down payment, or jumbo loans for larger properties. Ensure that the lender you choose caters to the type of loan that suits your situation best.
Customer Service and Support
Excellent customer service is crucial when dealing with online lenders as your primary communication methods will be via phone, email, or online chats. Lenders who offer high-quality customer service can significantly streamline the mortgage process, making it less stressful for you. Consider checking customer reviews and ratings for insights into a lender’s customer support.
Speed of Loan Processing
The time it takes for online mortgage lenders to process your loan application and close your loan can vary. If you’re working within a specific timeframe, you may prefer a lender known for quick processing. This is particularly crucial in competitive real estate markets, where being able to close swiftly could make all the difference.
Pre-approval Process
A seamless pre-approval process can signify an efficient online mortgage lender. Pre-approval offers you a rough estimate of how much you can borrow and helps you stand out in competitive property markets. Seek lenders that provide easy pre-approvals, preferably with only a soft credit check to avoid impacting your credit score.
User-friendly Technology
With most of your interaction with online lenders taking place digitally, user-friendly technology becomes paramount. Consider factors such as the simplicity of the application process, online document upload functionality, digital signature capabilities, and the ease of online loan tracking. A lender with a robust, intuitive platform can significantly simplify your online mortgage process.
Tips for Applying for a Mortgage Online
Embarking on the journey of applying for a mortgage online can feel overwhelming, especially if it’s your first time. But don’t worry – we’ve got some helpful tips to guide you through the process.
How to Prepare
Before you start your online mortgage application, it’s important to get your financial house in order. Here’s how:
Check your credit score: Your credit score is one of the main factors that lenders consider when evaluating your loan application. Make sure to check your credit reports for any errors and dispute them if needed. If your score is low, you might want to consider improving it before applying for a mortgage.
Verify your income: You will need to provide proof of income, so gather your recent pay stubs, W-2s, or tax returns. If you’re self-employed, you may need to provide additional documentation, like bank statements or profit and loss statements.
Get your documents in order: Apart from income verification, you’ll need other documentation, like identification, proof of assets, and information about your debts. Having these documents ready can speed up the application process.
Navigating the Application Process
Once you’re ready to apply, keep the following in mind:
Understand the terms: Make sure you understand the terms of the mortgage, like the interest rate, whether it’s fixed or adjustable, the length of the loan, and any fees involved.
Use online tools: Many online lenders offer useful tools like mortgage calculators. These can help you understand what your monthly payments might be based on different interest rates and down payment amounts.
Stay organized: Keep track of where you are in the application process. Most online platforms will save your progress, but it’s good to have your own record too.
Questions to Ask Your Lender
Securing a mortgage can often feel like a daunting process, particularly when applying online. To navigate this path with more confidence, it’s crucial to arm yourself with the right questions when engaging with potential lenders. The responses to these questions will not only give you a clearer idea about the mortgage terms but also about the lender’s transparency and commitment to customer service.
What types of loans do you offer?
The world of mortgages encompasses a variety of loan types designed to cater to different borrower needs. This includes conventional loans, government-backed loans such as FHA, VA, and USDA loans, and jumbo loans for larger mortgages.
Understanding the unique benefits and requirements of each type is important. For example, FHA loans may be suitable for those with lower credit scores, while VA loans are primarily designed for veterans. Your potential lender should be able to provide a comprehensive explanation of each option and help guide you towards the loan type that best fits your unique situation.
What are the interest rates and APR?
While the interest rate of a loan often takes center stage, the Annual Percentage Rate (APR) should not be overlooked. The APR provides a more comprehensive measure of cost as it includes the interest rate, lender fees, and other loan charges, offering a more complete picture of the long-term cost of the loan.
What fees are involved?
Beyond the interest rate, mortgages often involve several other fees that can impact the overall cost of the loan. These include origination fees, appraisal fees, home inspection fees, and potentially prepayment penalties. Some lenders may even charge for rate locks, which secure your interest rate for a specified period. It’s critical to ask for a detailed breakdown of all fees involved to ensure that there are no hidden costs that might surprise you down the line.
What Is the estimated timeline for approval and closing?
Mortgage approval and closing timelines can vary greatly among different lenders. Knowing the expected timeline can be crucial, especially if you’re working with a specific move-in date. In a competitive real estate market, a quick approval and closing process could make all the difference when multiple offers are being considered.
What are your minimum credit score and down payment requirements?
Understanding a lender’s minimum credit score and down payment requirements can help you gauge your chances of approval. These requirements can vary greatly depending on the loan type and the individual lender’s policies.
Do you consider alternative credit data?
For those with a limited credit history, some lenders may consider alternative credit data such as utility bill payments or rent payment history. Asking about these possibilities could potentially help you qualify for a loan even with less conventional credit information.
What is your process for loan servicing?
Understanding whether the lender will service your loan or if they intend to sell it to another company is important. If they plan to sell it, knowing who your point of contact would be for any issues or inquiries is crucial.
Bottom Line
Choosing an online mortgage lender is a significant decision that can impact your financial situation for years to come. Therefore, it’s critical to take the time to carefully evaluate each lender. From comparing interest rates to analyzing the type of customer service they offer, there are many factors to consider in this selection process.
We’ve touched upon some of the best online mortgage lenders available today. These lenders were chosen based on their competitive rates, comprehensive loan options, excellent customer service, and user-friendly platforms. However, remember that the “best” lender will vary depending on individual circumstances, and the top choices for others might not be the best for you.
While online mortgage lenders offer convenience and often competitive rates, they also come with their unique set of challenges. It’s vital to remember that transparency, trustworthiness, and a clear understanding of the terms and conditions are paramount in any financial decision, including choosing a mortgage lender.
We encourage you to conduct your own research and take advantage of online tools and resources that many of these lenders offer. Shopping around and comparing multiple lenders will help you find the best mortgage fit for your specific needs.
Remember, a mortgage is a long-term commitment. The time and effort spent in making a careful, well-researched decision now will pay dividends over the life of your loan. Happy home hunting!
Just weeks after New York-based digital lender Better Home & Finance Holding went public, Better issued pink slips to employees in early September in a new round of layoffs, Insider reported.
Better laid off about a quarter of its U.S. mortgage sales and origination team, according to the news outlet, citing two former employees who were affected by the latest downsizing.
The layoff news comes on the heels of Better going public via special purpose acquisition company (SPAC) Aurora Acquisition Corp. in August.
About 75 employees are left on the mortgage origination team in the U.S. as well as some employees in India, according to Insider.
While Better didn’t respond toHousingWire‘s inquiry about the number of affected employees, spokeswoman Jessica Schaefer told Insider the firm has more than 100 people left on the team.
Better plans to fill some vacant positions from the layoffs.
“As a publicly listed company, we’re focused on making prudent and disciplined decisions that account for market dynamics so that we can continue to serve both customers and shareholders for the long-term,” Better’s spokesperson said in an e-mailed statement to HousingWire.
“We are hiring more seasoned professionals who can sell in this tough mortgage environment and then making them 10X more productive through our continued investment [in] technologies such as Tinman and One Day Mortgage, which have created efficiencies that streamline and automate nearly every major function of homeownership,” the spokesperson said.
As of June, Better had 950 team members, a 91% decrease over an 18-month period from 10,400 in Q4 2021, according to its previous filing with the Securities and Exchange Commission (SEC).
While Better was an efficient refi shop during the pandemic years when rates hit record lows, the lender and other independent mortgage banks (IMBs) were hit hard by the Federal Reserve‘s monetary policy.
The digital lender reported a net loss of $45.5 million in Q2, an improvement from a net loss of $89.9 million the previous quarter.
In Q2, Better’s origination volume was $900 million across 2,421 loans, compared to production of $800 million across 2,347 loans funded in Q1.
When Better debuted on Nasdaq in late August, the SPAC deal unlocked $565 million of fresh capital for the unprofitable company.
The digital lender has pivoted its strategy from being a one-stop-shop to becoming a “mortgage-as-a-service” company or a white-label provider of mortgage tech.
“For things like homeowner’s insurance, title insurance, and Realtors, we’ve now just become a marketplace. We match the consumer with a partner capable of delivering the best product to them. So, we ended Better Real Estate for the sake of efficiency and savings for the consumer. We partner with best-in-class agents, insurance companies and title companies,” Better CEO Vishal Garg said in an interview with HousingWire in August.
Better will invest in tech-driven products like One Day Mortgage, a program that will allow customers to apply for a mortgage, get preapproved, lock their rate and receive a mortgage commitment letter within 24 hours.
“We are committed to further developing this technology during an interest rate environment where customers need it the most,” Better’s spokesperson noted.
Better was ranked as the 59th largest lender in Q1 2023, plummeting from the 19th in 2021, according to Inside Mortgage Finance.
Better — which went public after merging with special purpose acquisition company (SPAC) Aurora Acquisition Corp. on Thursday — funded a loan volume of $1.7 billion across 4,768 loans in the first six months of 2023. In Q2, Better’s origination volume was $900 million across 2,421 loans, compared to production of $800 million across 2,347 loans funded in Q1.
Of the $1.7 billion in production volume in the first half of 2023, refis accounted for $131 million and purchase loans consisted of $1.6 billion. Better’s funded loan volume of $1.7 billion in the first half of 2023 declined from $9.7 billion during the same period in 2022.
The lender’s gain-on-sale margin increased to 2.34% for the six months ended June 30, 2023, from 0.99% for the six months ended June 30, 2022. The jump in gain-on-sale margin resulted from “market volatility which positively impacted our mortgage platform revenue,” its 8-K filing states.
Better’s total market share of 0.2% during the six months of 2023 declined from 0.7% in the same period in 2022.
“The mortgage market remains competitive among lenders, given the interest rate environment and we continue to focus on originating the most profitable business available to us. As a result, we have pulled back on our most unprofitable channels, resulting in further declines to market share,” according to its filing.
In Q2, Better decided to wind down its in-house real estate agent business to focus on partnering with third-party real estate agents. The pivot was aimed at providing customers with real estate agent services, a business model that better aligns costs with transaction volumes, particularly in market environments with decreased mortgage volumes.
The company’s latest filing shows the firm had less than five agents as of June 8, 2023, declining from 470 agents as of December 31, 2021, and about 80 agents as of December 31, 2022.
Total operating expenses dropped to $183.9 million for the six months ended June 30, 2023, driven by lower funded volume as well as reductions in headcount-related costs and other operating expenses resulting from restructuring initiatives. Compared to the same period in 2022, operating expenses declined by 80% from $903.7 million.
Better scaled down about 91% of its workforce over an 18-month period to 950 team members as of June 8, from 10,400 employees in Q4 2021.
“As we have reduced headcount drastically in previous years and have continued headcount reductions in the first and second quarters of 2023, and expect to continue through 2023, we expect employee-related costs to decrease as a smaller administrative function is needed to support an organization with a much lower headcount,” the disclosure states.
Filings show Better completed the acquisition of Birmingham Bank – a regulated U.K bank – in April 2023. The company acquired 100% of the equity of Birmingham for a total consideration of $19.3 million – consisting of $15.9 million in cash and $3.4 million in deferred consideration.
The acquisition allows Better to grow and expand existing operations in the U.K. by enabling it to offer online deposits to consumers and hold U.K. residential mortgages, the company said.
Back in April, Better announced plans to create 40 jobs in Birmingham over the next three years following the buyout in fields such as business development, savings management, marketing, operations, finance, risk management and IT.
Its 8-K filing revealed that Fannie Mae notified Better about failing to meet the agency’s financial requirements due to the company’s decline in profitability and material decline in net worth.
“Subsequent to June 30, 2023, as a result of failing to meet FNMA’s financial requirements, the Company has entered into a Pledge and Security Agreement with FNMA on July 24, 2023, to post additional cash collateral starting with $5.0 million, which will be held through December 31, 2023,” the filing stated.
The company had cash and cash equivalents of $109.9 million as of June 30, 2023, down from $318 million on December 31, 2022.
Better’s stock opened for trading at $1.20 on August 28. They were down about 93% from $17.45 when blank check company Aurora closed for trading on the stock exchange on August 23.
Digital lender Better Home & Finance posted a $45.5 million net loss in the second quarter, according to results released days after the firm’s difficult debut on Wall Street.
The newly public company improved upon its $89.9 million net loss at the end of March, it disclosed Monday. Better last week completed its business combination with a special purpose acquisition company, and in doing so received a capital infusion totalling around $567 million, according to Securities and Exchange Commission filings.
Company founder and CEO Vishal Garg in a statement Monday touted the firm’s investment in its technology platform and its One-Day Mortgage offering. The business didn’t host an earnings conference call, and didn’t respond to a request for comment.
Enduring prolonged criticism since an ill-fated mass firing over Zoom in December 2021, Better was in the spotlight again last Thursday when its stock had a lukewarm debut. The company, trading under the “BETR” symbol, opened at $1.98 per share and ended its first day at $1.15 per share. The SPAC it merged with, Aurora Acquisition Corp., had ended the prior day trading at $17.44 per share under the “AURC” symbol. A Nasdaq tracker shows the companies’ stock performances as one.
Better’s debut also came on the same day Freddie Mac reported that mortgage rates were averaging at a 22-year high, a factor that Better, in SEC filings Monday, said was impacting its business.
The lender’s net loss in the first half of this year of $135.4 million was another improvement over the loss it posted in the same time last year, at $399.3 million for the six months ending last June. It also funded $1.7 billion over the first six months of 2023, compared to $9.7 billion in the first half of last year.
Refinances across the industry have all but dried up, and Better’s earnings reflected the larger trend, with $131 million in funded loan volume through the year’s first six months compared to $4.9 billion over the same period in 2022. The company also posted a 2.34% gain on sale margin in the first half of this year, against a 0.99% GOS margin in the same time last year.
Since the first half of 2022, Better reduced its expenses from $903 million to $183 million. The savings came in part due to a massive downsizing, with the company ending last year with just 1,300 employees from a peak of 10,400 in 2020.
The lender counted $0.8 billion in mortgage warehouse facilities as of June 30. It let a $150 million line mature earlier this month but also agreed to a new $175 million facility. It also had an outstanding corporate line of credit balance of $123.6 million after failing to meet a minimum revenue threshold on a trailing 12-month basis per a 2021 facility, it said. The company paid the remaining balance before the close of its business combination.
Better’s capital infusion included $528.6 million from an affiliate of SoftBank. Sponsor NaMa Capital declined to provide an additional $100 million of financing at the time of the SPAC merger, an agreement it reached with the companies earlier this year.
The firm’s leaders said they plan to expand their business partnerships with their Tinman loan origination platform, but as of June 30 only had a partnership with Ally Bank. The company also maintains cash offer, title insurance and settlement, and homeowners insurance divisions. It ended June with 0.2% of market share, compared to 0.7% at the end of last June.
This story has been updated with a statement from Better founder and CEO Vishal Garg. The company’s legal counsel said Garg couldn’t comment on the stock price, a representative said.
August 25, 2023 10:46 AM EDT
This story has been updated with a statement from Better founder and CEO Vishal Garg. The company’s legal counsel said Garg couldn’t comment on the stock price, a representative said.
Shares of Better Home & Finance Holding collapsed during its debut on Nasdaq Thursday. The digital lender went public after merging with the special purpose acquisition company (SPAC) Aurora Acquisition Corp. the prior day.
Better’s class A common stock, listed under the ticker “BETR,” declined to $1.15 at the closing on Thursday. They were down 93.4% from the previous close of $17.45 when the SPAC was still trading on the stock exchange.
It took two years for Better to go public. According to Bloomberg News, the digital lender is among the 10 worst-performing companies that merged with SPACs this year.
Why did it perform so poorly on day one?
The deal with Aurora was announced in May 2021, when historically low-interest rates boosted a SPAC mania in the U.S. and created a refi boom for mortgage lenders like Better. At that time, the company was valued by its investors at $7.7 billion.
But Better’s debut came at a low point in the mortgage market, with mortgage rates at their highest levels in more than two decades and historically low levels of home sales. That puts heavy pressure on its business. In addition, the SPAC mania has dried up amid increasing regulation.
Since the deal announcement, Better’s employment count nosedived to 950 workers in June 2023 from 11,000 employees in 2020. Better dealt with the bad press after Vishal Garg, Better’s founder and CEO, laid off employees via Zoom in December 2020.
The company posted a loss of $89.9 million in the first quarter of 2023; a far cry from the $500 million in income it realized in 2020, when most mortgage lenders posted historic profits.
Still, Garg managed to keep SoftBank and Novator Capital committed to investing in the company. The deal with Aurora will unlock $565 million of fresh capital for an unprofitable business.
The capital infusion includes a $528 million convertible note from affiliates of SoftBank and additional common equity from funds affiliated with NaMa Capital (formerly Novator Capital).
According to SEC filings, on August 21, the parties agreed that SoftBank’s purchase of $650 million in Better’s convertible promissory notes would be reduced by any amount received from the trust account of Aurora at closing and any amount of the $100 million commitment by Novator. The agreement reduced SoftBank’s maximum commitment to $550 million.
In an interview with HousingWire, Garg said the company has shifted its strategy ahead of its IPO—Better plans to be a mortgage marketplace that sells its technology platform to other companies.
“Our overall model has changed from being a one-stop-shop, where we do everything in-house, to being a one-stop-shop where we do the things in-house that we’re the best at,” Garg said in an interview. “For things like homeowner’s insurance, title insurance, and realtors, we’ve now just become a marketplace. We match the consumer to the product with a partner capable of delivering the best product to them.”
Since 95% of Aurora shareholders redeemed their shares, there was a small amount of publicly available shares, which contributed to the volatility on Thursday, Reuters reported.
“Combined with our capital, it will make us one of the best-capitalized players in the marketplace,” Garg told MPA in an interview via Zoom. “It will allow us to continue to double down on ‘one day mortgage’ which has become our flagship product, greater access to capital and something we’re really excited about being able … [Read more…]