Digital mortgage lender Better.com disclosed that it posted a net loss of $89.9 million in the first quarter of 2023 and cut approximately 91% of its workforce over an approximately 18-month period — due in large part to a substantial decline in its funded loan volume.
Better.com also spilled red ink in both 2022 and 2021, reporting a net loss of $888.8 million and $301.1 million respectively, according to the latest Securities and Exchange Commission (SEC) filings with Aurora Acquisition Corp. – Better’s merger partner.
The lender funded 2,347 loans in Q1 2023, a decline of 87% compared to 18,559 loans funded in Q1 2022. There was a total of about 29,818 loans funded for the year ending on Dec. 31, 2022, a decrease of 81% from 153,843 for the year ending on Dec. 31, 2021.
Of the $844 million in production volume in Q1 2023, refis accounted for $70 million and purchases loans accounted for $774 million. Better.com’s funded loan volume in Q1 2023 declined from $7 billion during the same period in 2022.
“We decreased our funded loan volume by approximately 80% year-over-year from $58 billion in the year ended December 31, 2021 to $11.4 billion in the year ended December 31, 2022,” according to the filing.
Better’s financial performance began to deteriorate in the second half of 2021 and continued through the first quarter of 2023 as a result of numerous factors, including elevated mortgage rates, damage to its reputation from negative media coverage and continued investments in its business, the disclosure states.
“Decreased productivity resulting from the reorganization of its sales and operations teams in the third quarter of 2021 and subsequent reversion in 2022 to accommodate Better’s reduced workforce and reduced demand for home loans in an elevated interest rate environment,” the filing states.
As of June 8, Better.com had about 950 team members, a 91% drop from its peak of about 10,400 employees in Q4 2021.
In June, the digital mortgage lender decided to shift its real estate strategy, pivoting to a partner agent model where Better.com will partner with outside agents as referral partners.
As part of the shift from its operating model of in-house licensed professionals, Better.com laid off the agents in its real estate brokerage subsidiary Better Real Estate LLC.
About 90 employees worked in Better Plus business lines as of June 8, primarily as real estate and insurance agents. This is a decline from 1,800 team members in Better Plus business lines during the fourth quarter of 2021.
Filings show Better.com has three different warehouse lines of credit with a combined amount of $1 billion. Two warehouse lines of credit – $250 million each – expire on June 6 and the other $500 million line has a maturity date of July 10.
Gain on sale margin was 1.89% for the three months ending on March 31, 2023, compared to a gain on sale margin of 1.11% and 2.88% for the first quarters in 2022 and 2021, respectively.
Better.com expects gain on sale margins to remain “compressed on substantially lower funded loan volume relative to the levels of 2020 and Q1 2021,” the filing states.
The mortgage lender’s total market share of 0.3% in Q1 2023 decreased by about 67% from 0.9% in Q1 2022. Better.com ranks as the 59th largest mortgage lender in the country, per Inside Mortgage Finance.
The company announced to go public via a special purpose acquisition company (SPAC) in May 2021, and the blank-check firm Aurora has since extended the deadline to complete its merger three times.
A handful of nonbank mortgage lenders went public via a SPAC during the pandemic years, but a combination of rising redemption rates – which point to how many investors are exchanging their shares for their money back – and sharp interest rate increases made it an unfavorable environment for SPACs.
If Aurora is unable to complete the merger by the deadline of September 30, 2023, and is unable to complete another business combination by that date, Aurora will dissolve and redeem public shares.