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For real estate brokerages looking for opportunities to win in the post-commission lawsuit era, getting into the mortgage business might look like a tempting opportunity to generate additional revenue.
Brokers and agents attending Inman Connect Las Vegas are getting perspectives on the pros and cons of delving into mortgages from several points of view.
Those points of view include HomeLight founder and CEO Drew Uher — who’s been there and done that — and Fathom Holdings CEO Marco Fregenal, who still sees value in being in the mortgage business “in a very selective way.” LoanDepot CEO Frank Martell is urging Compass to think twice about expanding into lending.
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A 2023 Best of Proptech Inman award recipient, Uher launched HomeLight in 2012 as an agent matching site with backing from Google Ventures, among others. HomeLight got into the mortgage business with the 2019 acquisition of digital mortgage lender Eave, which became HomeLight Home Loans.
Uher said HomeLight has since exited the home loan business, and that he has “a newfound respect for the mortgage industry.”
“If you rewind to 2021, [we had a] slide in our investor deck of … the billions and billions of dollars of revenue that we’re gonna do in the future … huge growth coming out of mortgage,” he said.
What HomeLight learned was that mortgage lending is “a very people-intensive business” that Uher said he’s happy to leave “to the people who are really good at it, who specialize in it. Our unit economics now look much more like software margins than they did a few years ago.”
According to records maintained by the Nationwide Mortgage Licensing System and Registry, HomeLight Home Loans Inc. holds licenses in 34 states and Washington, D.C., and at last count sponsored 13 mortgage loan originators.
HomeLight continues to partner with mortgage lenders on its power buyer and cash offer services, which it expanded with the 2022 acquisition of Accept.inc.
“The way the ‘buy before you sell’ product works, we used to do the mortgage in that transaction — that used to be how we would monetize it,” Uher said. “By stepping out of that, and by letting the agents’ preferred lender do the mortgage, we are no longer creating friction between the agent and the lender. We can actually leverage the lender as a channel.”
Fathom, which provides real estate brokerage, mortgage, title and insurance services, got into the mortgage business in 2021 with the $26.75 million acquisition of E4:9 Holdings and its three operating subsidiaries, Encompass Lending Group, Dagley Insurance Agency and Real Results. Although Fathom ended up selling Dagley back to its founder this year, it expanded its presence in lending by acquiring Washington, D.C.-based Cornerstone First Financial.
Fregenal said that while mortgage lending is a small part Fathom’s business, it can be a valuable tool in facilitating transactions.
“I think what makes Fathom unique is that we’re not trying to do everything for everyone,” he said. “Our goal is to facilitate a transaction. We use mortgage in a very selective way.”
Fregenal said Fathom is focused on helping its agents, and Encompass “has helped get deals done. But I agree you have to be hyper-focused on what you do well.”
LoanDepot President and CEO Frank Martell also warned real estate brokers and agents on Wednesday to think “long and hard” before getting into the mortgage business, calling it “a very complicated, highly regulated industry.”
Martell also serves as a board member for real estate brokerage Compass, and panel moderator Clelia Peters said he’s been advising the company on a possible expansion into home lending.
“He told me backstage that he was really encouraging [Compass to] step away from thinking about that type of integration,” Peters said Thursday.
Uher noted that “Zillow is leaning heavily into [mortgage], which I don’t understand at all. Usually, loan officers are the ones paying for Premier Agent subscriptions, and so it’s like they’re biting the hand that feeds them.”
Fregenal said the mortgage industry is doing pioneering work in artificial intelligence, and being exposed to that has been useful for Compass.
“The mortgage industry is doing a lot of work on AI [that] has caused them to really think about the process, right?” he said. “To think about how they spend money, how long it takes to get a mortgage. So for us, having a mortgage business also helps us understand that — how do we simplify that process as well?”
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