Goldman Sachs, through their principal strategic investment arm, became the first Wall Street Bank to invest in a mortgage originator since 2006. They own around 10% of Better, an online mortgage bank.
In December 2015, Better mortgage received $30 million in Series A investment from Goldman Sachs, Pine Brook, KCK Group Ltd, 1/10 capital, and IA Ventures.
It took the founding team 18 months to turn the idea into a reality; they took over a mortgage bank and completely remodeled it to suit the preferences of today’s digital-first citizens. Better mortgage funded 10,753 loans to date which represents about $5bil in origination.
Better only originates digital mortgages that match conditions of one of their 15+ mortgage buyers. As such everything they originate is being sold immediately. Final investors in these mortgages are yield-seeking lenders ranging from banks to sovereign wealth funds.
Better mortgage comprises of two divisions, one is the technical team and the second is capital markets’ team. The capital market team is responsible for understanding the needs of investors, what they want to own, their underwriting requirements and then use that information to facilitate building the software that helps to match those requirements with consumers and property attributes. The technical team is responsible for gathering data from the applicants in the easiest way possible and also extract data from third parties to fight fraud. Both processes are carried forward hand in hand to complete the approval process.
The market
Real estate is one of the largest tangible assets with total US real estate stock worth $24 trillion. Consumers are spending almost 33% of their incomes on housing. Mortgages is a $14 trillion market but is still stuck in the archaic world of paperwork and high middlemen costs. Long wait in the banks, talking to a never ending list of executives and officers, providing an infinite number of documents and still waiting over 50-60 days to get that elusive approval for the mortgage, are the most common issues faced by prospective homeowners.
Having experienced all this first hand, Vishal Garg, founder and CEO came up with Better mortgages in March 2015 to disrupt this humongous market and to provide the consumers a hassle-free option to buy or refinance their mortgage. Vishal was an asset manager and was at the forefront of many successful start-ups (Phoenix holding, MyRichUncle). Along with him, Better mortgage team comprises of Eric Bernhardsson (CTO). He was the head of machine learning and recommendations at Spotify.com. Fil Zembowicz, head of products is a Harvard University pass out and was working at Google’s as a product manager before he joined Better mortgages.
The statistic shows the number of existing homes sold in the United States from 2005 to 2015, and a forecast thereof for 2016 and 2017. In 2014, around 4.94 million of existing homes were sold in the U.S. This highlights the total addressable market for the New York-headquartered start-up.
Number of existing homes sold in the United States from 2005 to 2017 (in million units)