Better, after second-quarter loss, touts ultra-efficient mortgage business

Better home and financeswhich just posted another quarterly loss, claims to have some of the most efficient sales operations in the mortgage industry.

The digital lender, which reported earnings for only the fourth time as a publicly traded company, posted a net loss of $42 million in the second quarter, it said on Thursday. That is an improvement from the 51 million dollar deficit it was posted at the beginning of the year.

Positive metrics included a 45% increase in funded loan volume to $962 million and a six basis point increase in sales margin to 243 basis points. Better revenue increased 41% quarter over quarter to $31 million.

Better’s origination volume is significantly different from what it was during the refinancing boomwhen the company claimed a market share of 1-2%. The lender, like many others, got into a huge hole during the market downturn. Company management said it is forecasting a $10 billion loan volume breakeven figure, a level it has achieved in the past. Chief Financial Officer Kevin Ryan said the company will detail that path next month.

Executives, meanwhile, said their sales and customer service operations have among the industry’s lowest costs per loan funded due to investments in artificial intelligence. Better uses generative AI for autonomous voice agents that create pre-approvals, comprehensive document scanning and underwriting that lays the foundation for next-day mortgage loan originations.

Founder and CEO Vishal Garg said during the call that the company could reduce its overall loan approval costs by over 50% in the coming years.

“Our current loan origination labor costs from a processing and underwriting perspective are about $1,200 per loan,” Garg later told National Mortgage News. “We expect that to be reduced to as low as $500 per loan over time.”

The CEO also estimated that Better can reduce its current distribution costs per funded loan from around $2,500 currently to $500. Overall, the lender could potentially reduce the cost of originating loans to as little as $1,000, which is well below the industry average. Freddie Macfound in a loan origination cost study published in May that the industry’s most efficient originators charged an average of $6,900 per loan.

The company reported second-quarter expenses of $73 million, unchanged from the end of March. It increased its marketing spend 87% quarterly, including broadcast television and streaming, Garg said, and a Sponsorship with the Premier Lacrosse League.

Better had $507 million in cash and cash equivalents at the end of June, retaining much of the capital injection it received in its IPO last August, and has warehouse credit lines totaling $425 million.

Garg also said that the productivity of Better’s loan officers is “the best in the industry.” The lender has looked for more experienced LOsand the CEO said that those who used to close 2 to 4 loans per month are now closing over 10 per month. There is still a decline in training new lenders on the company’s loan origination system, Tinman, which represents a “learning curve.”

“They don’t have to do manual loan estimates or send out disclosures themselves,” Garg said. “They don’t have to remember to get documents or data. They just have to focus their day on what they do best, which is selling.”

The publicly traded lender will also conduct a 50-for-1 stock split to improve its weak performance on the Nasdaq. On Thursday afternoon, Better’s stock was trading at $0.38 per share following the morning’s release.

The split, which was approved by shareholders in June, will take effect after the market closes on Friday, Aug. 16, and will begin trading on the new basis on Monday, Aug. 19. The lender said it would provide further details in an 8-K filing later Thursday.