Cloud-based banking software provider Blend delivered double-digit revenue growth in the second quarter, adding new mortgage clients like Mr. Cooper and KeyBank, while deepening relationships with existing clients including Opendoor and Fairway Independent Mortgage.
Blend, who also refers homebuyers to partner real estate agents, said it now provides service to 32 of the top 100 US financial services companies and 28 of the top 100 US non-bank mortgage lenders.
The San Francisco-based software developer second quarter reported revenue of $ 32.1 million, up 46% from a year ago. With expenses up 75% to $ 59.3 million, Blend recorded an operating loss of $ 39.6 million, up 90% from the second quarter of 2020.
Blend, which announced a deal in March to acquire a national title insurance and settlement services provider, Title365, from Mr. Cooper Group for $ 422 million, said the deal was closed on June 30. . It was too late to contribute second quarter revenue, but “Integration work is well advanced,” the company said.
IPO raised $ 360 million
This was Blend’s first quarterly report to investors since it went public last month, raising around $ 360 million in a IPO on July 16 20 million shares at $ 18 each.
Mixed stocks, which trade as BLND on the New York Stock Exchange, closed at $ 18.05 on Friday, down 9% from the earnings release after Thursday’s closing bell. Since the IPO, Blend’s share price has ranged from $ 16.05 to a high of $ 21.04.
“In the second quarter, we continued to expand our client base and expand among our existing clients, completed a significant acquisition that will accelerate the advancement of our platform, and achieved a successful IPO with strong interest and investor support, ”Nima Ghamsari, co-founder of Founder Blend, chief executive officer and chairman of the board, said in a statement.
Markets provide referrals to real estate agents, settlement services
Designed to provide an “end-to-end customer journey for any banking product,” Blend says its cloud-based banking platform is used by more than 300 customers, including Wells Fargo and US Bank, to process more than $ 5 billion loans per day.
The platform is built on an ecosystem of technology, data and service providers, comprising more than 1,200 real estate agents, 24 insurance companies and more than 900 settlement service providers. According to Blend, the platform can be integrated with offerings from 45 technology providers, including CRM platforms, loan origination systems, and pricing and product engines.
Consumers using Blend’s platform can purchase from real estate agents, insurance companies, and other service providers through integrated marketplaces that are introduced as these needs arise. The platform enables mortgage lenders to automate title engagements and streamline communication with homebuyers and settlement teams.
Whether or not they want to participate in the marketplaces, which are customizable, is up to Blend customers to decide, Erik Wrobel, Blend’s product manager, told Inman.
“The information starts to flow the moment the consumer makes their request – we can start pre-approving the title, the home insurance,” Wrobel said. “The lender can decide whether to allow [a marketplace], and if they preferred the title company, we can help them hook it up as well. “
To help provide homebuyers with “end-to-end journeys,” Blend operates its own title insurance agency and property and casualty insurance agency. Blend said the acquisition of Title365 expands its ecosystem of partners by providing access to a network of more than 7,000 notaries. Last year, Title365 generated $ 212 million in revenue, and as of March 31, the company had six of the top 12 mortgage lenders among its customers.
“Our acquisition of Title365 will allow us to further integrate the title, settlement and escrow process into our platform and develop a marketplace that provides consumers and financial services companies with the flexibility to choose partners from. title insurance that provide services at competitive rates. »Said in a July 16 investor prospectus.
Blend Realty provides broker-to-broker referrals
Blend also operates a real estate brokerage business, Blend Brokerage Inc., which operates under the name Blend Realty. Operating Blend Realty provides the company with a mechanism to provide broker-to-broker referrals, collecting a 20 percent referral fee when potential homebuyers close a home with a partner agent.
“We pre-qualify buyers, screen tires and connect you with motivated buyers who have a qualifying letter from our network of lenders,” Blend Realty website promises real estate agents.
To qualify as a Blend Realty Partner Agent, you must have at least three years of experience, close at least eight transactions per year, and agree to provide homebuyers with a 0.6% Blend commission discount. Realty.
Blend claims that the commissions or service fees it collects when consumers use its marketplaces to choose a real estate agent or title and settlement services are progressive. So far, they have generated “a negligible amount of income”.
But according to the July investor prospectus, that income is expected to increase.
“Our marketplaces are designed to provide greater choice and flexibility to consumers and to assist financial services companies by providing them with a more comprehensive offering in partnership with Blend,” the company said. “As we drive adoption of our software platform, we expect these commissions and service fees to represent a larger share of our revenue. “
Since Opendoor turned on Blend in 2018 to accelerate the development of its mortgage offerings, for example, this year, iBuyer has also started using Blend’s integrated marketplace for property and casualty insurance.
“Blend has helped us achieve our goals of providing a digital experience for our customers, while accelerating our time to market,” said Eric Wu, co-founder and CEO of Opendoor, in an endorsement from Opendoor Services. Blend which is cited in the prospectus.
RESPA a problem when providing end-to-end services
Some mortgage lenders seek to provide end-to-end services on their own, through sister companies offering title and settlement services, and licensed real estate brokerages that connect mortgage applicants with real estate agents.
Rocket Mortgage’s sister company, Rocket Homes, has real estate brokerage licenses in all 50 states, which allows it to operate a property search site and agent referral network. Rocket Homes recently announced that they will be hiring real estate agents and launching an iBuyer program this year. With its ties to Rocket Mortgage and Amrock, a provider of closing and settlement services, Rocket Homes said it aims to provide a “full suite of services.”
LoanDepot and its agent-matching affiliate, mellohome, plan to offer cash rebates of up to $ 7,000 on bundled services when clients buy and sell with a preferred mellohome real estate agent, finance with LoanDepot and choose the company’s title insurance services.
The Better family of companies includes not only Better Mortgage, but also a growing real estate brokerage subsidiary, Better Real Estate LLC; a title insurer, Better Settlement Services; and Better Cover LLC, a provider of home insurance policies.
Companies providing end-to-end services should ensure they comply with the RESPA (Real Estate Settlement Procedures Act) which governs compensation for business referrals made under any mortgage related to the federal government.
Rocket Homes’ parent company, Rocket Cos. stated that it is “fully cooperating” with a civil investigation request issued by the Consumer Financial Protection Bureau in May 2020, to determine whether Rocket Homes has conducted business in a manner that violates RESPA, and is “confident in the compliance processes put in place by Rocket Homes.
In its July prospectus, Blend warned investors that RESPA and other federal and state regulations pose risks to its business.
“We believe that all payments we make to third parties comply with applicable laws,” Blend said. “However, if a regulator takes a contrary position and wins, we will need to change the way we pay fees to those employees or directors or require that entities receiving such payments be registered or authorized.”
Email Matt Carter