Pedestrians wearing protective masks pass through SoftBank Corp. signage. near a store in Tokyo, Japan, on May 15, 2020.
Kiyoshi Ota | Bloomberg | Getty Images
SoftBank has invested $ 500 million in Better.com digital mortgage lenders amid what has been a hot market for U.S. residential real estate and mortgage refinancing fueled by low interest rates.
The news was first reported by The Wall Street Journal on Thursday and later confirmed to CNBC by sources familiar with the matter.
Better investment stocks ranked No. 15 on CNBC’s Disruptor 50 list last year, with approximately $ 6 billion. This is a significant leap since the company’s last round of financing in November 2020, which is valued at $ 4 billion, according to PitchBook data.
The New York City-based company was founded in 2016 by Vishal Garg, a former Morgan Stanley analyst, after an agreement was reached to buy a home for his family. A cash buyer was able to exceed the terms of his traditional mortgage lender, and that was when Garg thought there had to be a better way. He used the down payment he had booked to start Better.
Amid a frenzy in pandemic-induced refinancing, Better reportedly lent $ 25 billion in loans last year and $ 14 billion in the first quarter of 2021 alone, according to the newspaper. In addition, the company not only generated $ 800 million in revenue last year, but also profits, and is expected to be made public by the end of 2021.
Mortgage rates have risen and refinancing activity has slowed recently. House prices have risen at a record pace amid high demand, pandemic relocations and low supply, which has stifled the recent performance of the housing market.
The Better platform moves the mortgage process completely online, offering customers the ability to upload and eSign documents, and aims to reduce the closing time of an industry average from 42 days to 21 days. Garg says the digital-only approach also helps lessen the bias against minorities when applying for mortgages. The company has previously cited a study by the National Bureau of Economic Research which showed that face-to-face lenders reject minority applicants 6% more often than comparable non-minority applicants and also charge applicants more. of minorities for their mortgages.
The newspaper reported that SoftBank is buying shares from Better’s existing investors and agreed to cede all of its voting rights to Garg “as a sign of his eagerness” to support the company. Better’s previous investors include Goldman Sachs, Citigroup, Kleiner Perkins and the American Express business group.
While the most valuable companies have consistently come from Silicon Valley and San Francisco, New York is poised to raise a larger share of dollars and attention from initial operations this year. Compass, a technology-driven real estate brokerage, also backed by SoftBank, was worth about $ 8 billion when it began trading on the New York Stock Exchange last Thursday.
Valued at $ 35 billion, robotic automation company UiPath recently unveiled its IPO and is positioning itself to become New York’s most valuable technology company at the time of its debut. on Wall Street. In the healthcare field, insurance company Oscar began trading in New York City last month and is now worth about $ 6.2 billion. In finance, online home insurer Lemonade went public last July and is now valued at $ 6.1 billion.