SoftBank Invests $ 500 Million in Digital Mortgage Lender

Pedestrians wearing protective masks walk past SoftBank Corp. signage. near a store in Tokyo, Japan on May 15, 2020.

Kiyoshi Ota | Bloomberg | Getty Images

SoftBank has invested $ 500 million in digital mortgage lender amid what has been a US residential real estate and mortgage refinancing market fueled by record interest rates.

The news was first reported by the Wall Street Journal on Thursday and then confirmed to CNBC by sources familiar with the matter.

The investment values ​​Better, ranked No. 15 on last year’s CNBC Disruptor 50 list, at around $ 6 billion. This is a significant jump from the company’s last funding round in November 2020, which valued Better at $ 4 billion, according to PitchBook data.

The New York-based company was started in 2016 by Vishal Garg, a former Morgan Stanley analyst, after a failed deal to buy a house for his family. A cash buyer was able to beat his traditional mortgage lender’s schedule, and that’s when Garg thought there had to be a better way. He used the deposit he had set aside to start Better.

Amid a pandemic-induced refinancing spree, Better reportedly granted $ 25 billion in loans last year and $ 14 billion in the first quarter of 2021 alone, according to the Journal. Additionally, the company not only generated $ 800 million in revenue last year, but also in profits, and is expected to go public by the end of 2021.

Mortgage rates have increased and refinancing activity has recently slowed. Home prices have risen at a record pace amid high demand, pandemic offshoring and low supply, the latter choking recent housing market actions.

Better’s platform is moving the mortgage process entirely online, giving clients the ability to electronically upload and sign documents, and claims to reduce the time to close from an industry average of 42 days to 21 days. Garg says the digital-only approach also helps reduce bias against minorities when applying for mortgages. The company previously cited a National Bureau of Economic Research study 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 was buying shares from existing Better investors and had agreed to cede all of its voting rights to Garg “as a sign of its readiness” to support the company. Previous Better investors include Goldman Sachs, Citigroup, Kleiner Perkins and the corporate venture arm of American Express.

While the most valued companies have always come from Silicon Valley and San Francisco, New York is poised to capture a greater share of startup investment and attention this year. Compass, a technology-based real estate brokerage firm also backed by SoftBank, was valued at around $ 8 billion when it began trading on the New York Stock Exchange last Thursday.

Valued at $ 35 billion, robotic automation company UiPath recently filed for its IPO prospectus and is well positioned to become New York’s most valuable tech company when it debuts on Wall Street. In healthcare, insurance company Oscar started trading on the NYSE last month and is now worth around $ 6.2 billion. In finance, online home insurer Lemonade went public last July and is now valued at $ 6.1 billion.

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