Pedestrians wearing protective masks will walk past signage for SoftBank Corp. on May 15, 2020. at 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 case.
The investment values Better, ranked No. 15 on last year’s CNBC Disruptor 50 list, at about $ 6 billion. That’s a significant jump from the company’s last round of funding in November 2020, which valued Better at $ 4 billion, according to PitchBook data.
The New York City-based 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. An all-cash buyer was able to beat the timing of his traditional mortgage lender, and at that point Garg thought there had to be a better way. He used the deposit he set aside to start Better.
Amid a frenzy in pandemic-induced refinancing, Better reportedly made $ 25 billion in loans last year and $ 14 billion in the first quarter of 2021 alone, according to the Journal. In addition, the company generated not only $ 800 million in revenue, but also profit last year, and is expected to be made public by the end of 2021.
Mortgage rates have gone up and refinancing activity has slowed recently. House prices have soared at record pace amid high demand, pandemic displacements and low supply, the latter of which has suppressed recent housing market moves.
Better’s platform is moving the mortgage process completely online, allowing customers to upload and electronically sign documents, and claims to cut the closing time from an industry average of 42 days to 21 days. Garg says the digital-only approach also helps reduce minority preference when applying for mortgage loans. The company previously cited a study by the National Bureau of Economic Research showing that face-to-face lenders reject minority applicants about 6% more often than comparable non-minority applicants, and also charge minority applicants more for their mortgages.
The Journal reported that SoftBank is buying shares from Better’s existing investors and agreed to give 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 corporate venture arm of American Express.
While the most valuable companies are consistently hailing from Silicon Valley and San Francisco, New York is poised to bring in more of its start-up deal dollars and attention this year. Compass, a technology-driven real estate brokerage also backed by SoftBank, was worth about $ 8 billion when it traded on the New York Stock Exchange last Thursday.
Worth $ 35 billion, robot automation company UiPath recently filed its IPO prospectus and is positioned to become New York City’s most valuable technology company by the time of its Wall Street debut. In healthcare, insurance company Oscar began trading on the NYSE last month and is now worth about $ 6.2 billion. In the financial world, online home insurance company Lemonade went public last July and is now valued at $ 6.1 billion.