Momentum Builds in Mortgage Disruption

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Significant changes continue in the mortgage space as portals, iBuyers, Power Buyers, and brokers invest in building end-to-end real estate ecosystems.

Why it matters: Real estate tech disruptors are investing billions to build integrated brokerage and mortgage experiences. These companies employ licensed brokers -- Mortgage Loan Originators (MLOs) -- that occupy a critical position in securing or refinancing a mortgage.

  • The number and growth of MLOs is an important leading indicator of a company's firepower and strategic intent.

Big picture: Of the venture-backed disruptor pack, the companies with the most MLOs are those attempting to develop a complete ecosystem play anchored around mortgage: Power Buyers.

  • Homeward, Knock, and Flyhomes are good examples, while Orchard lags due to a slower-growth employee agent business model.

 
 

Notable growth in MLOs occurred at Opendoor and Flyhomes, sending a strong signal of intent.

  • In November 2021, Opendoor acquired RedDoor, a digital-first mortgage brokerage, with 10 MLOs.

  • In Q4 2021, Flyhomes accelerated its hiring of MLOs to meet current and expected demand.

 
 

Comparatively, Zillow has more firepower but has been shedding MLOs since May 2021, with a significant drop in January.

  • Knock, a Power Buyer, also saw a significant decline in MLOs during January.

 
 

Redfin made a huge move in January, acquiring Bay Equity Home Loans for $135 million, adding 485 MLOs to its roster.

  • This positions Redfin well ahead of Zillow in terms of underwriting capacity -- and is a strong signal of future intent in the space.

 
 

Yes, but: All of these companies pale in comparison to the behemoths of the mortgage industry.

  • Rocket Mortgage (12k MLOs) and Better Mortgage (1.5k MLOs) have both announced plans of their own to expand into the brokerage space.

The bottom line: Mortgage lies directly on the path of brokers, portals, and disruptors attempting to build an end-to-end real estate ecosystem.

  • Opendoor is clearly ramping up its mortgage resources and ambitions, while Redfin has made a big investment in the space.

  • Tracking the number of MLOs over time reveals how serious these companies are and their potential to grab market share.