New and Deeper Relationships Drive Blend’s Revenue in Q2

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Cloud banking software provider Blend reported double-digit revenue growth in the second quarter as it added new mortgage clients such as Mr. Cooper and KeyBank, while deepening relationships with existing clients including Opendoor and Fairway Independent Mortgage.

Blend, which also refers home buyers to real estate partners, said it currently provides services to 32 of the top 100 US financial services companies and 28 of the top 100 US non-bank mortgage lenders.

San Francisco-based software developer second quarter revenue statement $ 32.1 million, up 46 percent from a year ago. As expenses also rose 75 percent to $ 59.3 million, Blend recorded an operating loss of $ 39.6 million, up 90 percent from the second quarter of 2020.

Blend, which announced in March its agreement to acquire national title and settlement insurance provider Title365 from Mr. Cooper for $ 422 million, said the deal closed on June 30. It was too late to increase revenue in the second quarter, but “Integration work is well under way,” the company said.

IPO raised $ 360 million

It was Blend’s first quarterly report to investors since it went public last month. July 16 initial public offering 20 million shares of $ 18 each.

Mixed stocks that are traded as BLND on the New York Stock Exchange, closed at $ 18.05 on Friday, down 9 percent from its post-closing earnings report on Thursday. Since the IPO, Blend’s price per share has ranged from $ 16.05 to $ 21.04.

“In the second quarter, we continued to expand our client base and grow among existing clients, closed a major acquisition that will accelerate the advancement of our platform, and conducted a successful IPO with great interest and investor support,” said Nima Gamsari, co-author of Blend. founder, CEO and chairman of the board of directors, the statement said.

Marketplaces provide referrals to real estate agents, settlement services

Blend says its cloud-based banking platform, designed to provide a “seamless consumer journey to any banking product,” is used by more than 300 clients, including Wells Fargo and US Bank, to process more than $ 5 billion in loans per day.

The platform relies on an ecosystem of technology, data and service providers, including over 1200 real estate agents, 24 insurance companies, and over 900 settlement service providers. Blend says the platform can be integrated with offerings from 45 technology providers, including CRM platforms, lending systems, and pricing and product mechanisms.

Consumers using the Blend platform can shop for real estate agents, insurance companies and other service providers through integrated marketplaces that are created as these needs arise. The platform enables mortgage lenders to automate property rights and streamline interactions with homebuyers and settlement teams.

“Blend customers have to decide for themselves whether they want to participate in custom marketplaces,” Eric Wrobel, head of Blend’s products, told Inman.

“The information starts flowing in the moment the consumer submits an application – we can start pre-approving property rights, homeowners insurance,” Wrobel said. “The lender can decide whether to allow [a marketplace]and if they prefer the title company, we can help them connect that too. “

To help homebuyers travel end-to-end, Blend operates its own property rights and property and accident insurance agency. Blend said the Title365 acquisition expands its partners’ ecosystem by providing access to a network of more than 7,000 notaries. Title365 generated $ 212 million in revenue last year, and as of March 31, the company had six of the top 12 mortgage lenders as clients.

“Our acquisition of Title365 will enable us to integrate title, settlement and escrow processes into our platform and develop a marketplace that gives consumers and financial services firms the flexibility to choose title insurance partners that provide services at competitive prices,” said Blend. said in 16 July Investor Prospectus

Blend Realty provides broker-to-broker referrals

Blend also operates a real estate brokerage business, Blend Brokerage Inc., which does business as Blend Realty. Operating Blend Realty provides a mechanism for the company to provide broker-to-broker referrals, collecting a 20 percent referral commission when prospective home buyers close a home with a partner agent.

“We pre-screen buyers, filter out those who fail, and connect you with motivated buyers who have a qualification letter from our network of lenders,” reports the Blend Realty website. promises to real estate agents

To qualify as a Blend Realty partner agent, you must have at least three years of experience, complete at least eight deals per year, and agree to provide home buyers with a 0.6 percent discount on Blend Realty fees.

Blend states that the commissions or service fees it collects when consumers use its marketplaces to select a real estate agent or title and settlement services are additional. So far, they have brought in “an insignificant amount of income.”

But according to the July investor prospectus, that revenue is expected to rise.

“Our marketplaces are designed to provide consumers with more choice and flexibility, and to help financial services companies by providing them with a more complete offering in partnership with Blend,” the company said. “As we drive adoption of our software platform, we expect these commissions and service fees to account for the majority of our revenues.”

Since Opendoor reached out to Blend in 2018 to accelerate the development of its mortgage offerings, for example, this year iBuyer started using Blend’s integrated marketplace for property and casualty insurance.

“Blend has helped us achieve our goals of delivering digital opportunities to our customers while reducing time to market,” said Opendoor Co-Founder and CEO Eric Wu, endorsing Blend’s services outlined in the prospectus.

RESPA problem in end-to-end service provision

Some mortgage lenders themselves seek to provide comprehensive services through subsidiaries offering title and settlement services and through licensed real estate brokerages that connect mortgage applicants with real estate agents.

Rocket Mortgage’s subsidiary, Rocket Homes, has real estate brokerage licenses in all 50 states, allowing it to operate a property search site and agent network. Rocket houses recently announced this year he will hire full-time real estate agents and launch the iBuyer program. With ties to Rocket Mortgage and Amrock, a closing and settlement service provider, Rocket Homes said it is committed to providing a “complete set of services.”

LoanDepot and its agent recruiting subsidiary, mellohome, plan to provide cash discounts up to $ 7,000 for complete services where clients buy and sell with their preferred mellohome real estate agent, finance with CreditDepot and opt for company title insurance services.

The Better Group of Companies includes not only Better Mortgage, but also fast growing subsidiary real estate brokerage, LLC “Best Real Estate”; title insurer, Better Settlement Services; and Better Cover LLC, a homeowners insurance policy provider.

Comprehensive service companies must comply with the RESPA ( Real Estate Settlement Procedure Law), which governs compensation for a business line made in connection with any federal mortgage loan.

Rocket Cos., The parent company of Rocket Homes, said it is “fully cooperating” with a civil investigation request issued by the Consumer Financial Protection Bureau in May 2020 to determine if Rocket Homes has carried out any action that violates the RESPA, and ” confident in Rocket Homes compliance processes. “

In its July prospectus, Blend warned investors that RESPA and other federal and state regulations pose risks to its business.

“We believe that any payments we make to third parties are compliant with applicable laws,” Blend said. “However, if any regulator takes the opposite position and gains the upper hand, we will be required to change the way we pay such employees or managers, or require organizations that receive such payments to register or obtain a license.”

Email Matt Carter



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