Pedestrians wearing protective masks will walk past the directions for SoftBank Corp. on May 15, 2020. near a store in Tokyo, Japan.
Kiyoshi Ota | Bloomberg | Getty Images
SoftBank has invested $ 500 million in digital mortgage lender Better.com amid a hot US residential real estate and mortgage refinancing market fueled by record 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.
The investment value is better, at number 15 on the CNBC Disruptor 50 list last year, at about $ 6 billion. According to PitchBook data, this is a major leap from the company’s last round of financing in November 2020, which Better valued at $ 4 billion.
The New York City company was founded in 2016 by Vishal Garg, a former analyst at Morgan Stanley, after a deal to buy a home for his family fell through. A buyer who pays cash could beat the timing of his traditional mortgage lender, and that was when Garg thought there had to be a better way. He uses the deposit he set aside to start Better.
Amid a frenzy in pandemic-induced refinancing, Better reportedly extended $ 25 billion in loans last year and $ 14 billion in the first quarter of 2021 alone, according to the Journal. In addition, the company not only generated $ 800 million in revenue last year, but also profits, and is expected to be announced by the end of 2021.
Mortgage rates have risen and refinancing activities have slowed recently. House prices have risen at record rates amid strong demand, pandemic shifts and low supply, the recent performance of which has halted the housing market.
Better’s platform shifts the mortgage process completely online, giving customers the opportunity to upload and e-sign documents, claiming it reduces the closing time of an operating average from 42 days to 21 days. Garg says the digital approach also helps reduce the bias against minorities when applying for mortgage loans. The company previously cited a study by the National Bureau of Economic Research which shows that credit providers reject minority applicants about 6% more often than comparable non-minority applicants, and also minority applicants charge more for their mortgage loans.
The Journal reported that SoftBank was buying shares of Better’s current investors, and agreed to give all of its voting rights to Garg “in a sign of its eagerness” to support the company. Better’s previous investors include Goldman Sachs, Citigroup, Kleiner Perkins and the corporate venture of American Express.
Although the most valuable companies have consistently come from Silicon Valley and San Francisco, New York is poised to attract a larger share of the initial dollars and attention this year. Compass, a brokerage firm also backed by SoftBank, had a value of about $ 8 billion when it started trading on the New York Stock Exchange last Thursday.
The $ 35 billion robotic automation company UiPath recently filed its IPO prospectus and is positioned to become the most valuable technology company in New York at the time of its Wall Street debut. In health care, insurance company Oscar began trading on the NYSE last month and is now worth about $ 6.2 billion. In terms of finances, online home insurer Lemonade went public last year and is now valued at $ 6.1 billion.