Despite a bleak outlook for home buying, online mortgage lender Better.com has pushed ahead with its long-awaited plans to go public.

The New York City-based startup, which was founded in 2014, on Wednesday announced that it has completed its merger with Aurora Acquisition Corp., a special-purpose acquisition company, in a transaction that takes the company public. Better will begin trading Thursday on the Nasdaq under the ticker symbol “BETR.”

The listing comes two years after the company initially filed to go public but was beset with issues such as lackluster earnings and controversial layoffs.

After the deal closes, Better “will be one of the five best capitalized mortgage companies in America,” Vishal Garg, the chief executive of the company, which offers mortgages, insurance, and other services for home buyers, told MarketWatch. “There’s just tremendous market opportunity ahead of us.”

Mortgage lending has taken a big hit over the past year, after the U.S. Federal Reserve hiked interest rates to quell inflation. While inflation is still above its 2% target, with the July inflation rate at 3.2%, there may be more hikes to come. And though hikes don’t directly push up mortgage rates, the market’s expectation of monetary policy tightening impacts the 10-year Treasury note, which in turn causes rates to rise.

The 30-year was averaging at 7.31% for the week ending Aug. 18, the Mortgage Bankers Association said on Wednesday morning. That’s the highest level since December 2000. Purchase applications fell that week to the lowest level in 28 years.

Mortgage lenders have struggled with high rates over the past year, as rates surged and consumers sharply pulled back on buying homes or refinancing. In the first quarter of 2023, independent mortgage banks and mortgage subsidiaries of chartered banks lost nearly $2,000 per loan, according to the MBA. 

Lenders have tightened costs, and that number has since dropped to a loss of $534 on each loan they originated in the second quarter of 2023. But lenders find it hard to drum up business. Homeowners see little reason to refinance, and home buyers are feeling the sting of higher rates that are shrinking their budgets. In some parts of the country, buyers are also struggling with few home listings, leading to low inventory. Sales of previously-owned homes were down 2.2% in July, as compared with a year ago.

“There were signs of improvement in the second quarter of 2023,” Marina Walsh, vice president of industry analysis at the M.B.A., said in a statement. “Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, the majority of mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

Amid this backdrop, Garg said that a big part of why the company has pushed on is to access more than $500 million in additional capital from SoftBank. 

The company disclosed in a Wednesday release that its combination with Aurora gives it access to $565 million in fresh capital, including a $528 million convertible note from SoftBank affiliates and additional common equity from funds affiliated with NaMa Capital.

Companies that go public through SPACs avoid the scrutiny that comes with a traditional IPO roadshow, and investors rely on the due diligence of the SPAC managers. 

With that money, Garg said he plans to build out the company’s offerings further, such as its One Day Mortgage product, where a customer can apply for a mortgage, get preapproved, and get a commitment within 24 hours. Garg said he also planned to invest capital into machine learning and artificial intelligence models, as well as potential acquisitions.

“We believe that we’re going to come out of this abyss in the mortgage market stronger and faster than anyone else and well-capitalized,” he added. 

Rates are poised to drop in the coming months, according to forecasts. For instance, housing giant Fannie Mae expects the 30-year to drop to 6.6% by the end of the year and 6.1% in 2024. 

And when that happens, Garg said he planned to be there: “When interest rates come down and refinances become viable again, our one day mortgage will do extremely well for consumers who want to refinance,” Garg said. “When the market finally turns, we think we’ll be in the best position to take advantage of it.”

Garg made headlines in 2021 when he infamously laid off 900 employees on Zoom. The reaction to the firings provoked criticism from across the internet, and Garg had taken a break to reflect on his leadership. 

“When you’re a startup and you’re growing fast and you move fast and break things, it’s generally OK,” Garg said, reflecting on the incident. “Now, as a more established player in the market, we have to carefully consider all constituents. And we’ve spent two years in leadership training and coaching to make sure that we consider all constituents when we take certain actions.”

Emily Bary contributed.


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