Prior to the announcement of a $ 100 million Series A financing round in June and a naming contract with the Major League Soccer team, Columbus Crew, Lower LLC had been relatively unremarkable as a direct mortgage lender.
But Lower has a backstory that explains why the company believes it can now position itself not just as a lender, but “Anything for your home, for Lower”.
Dan Snyder, CEO of Lower LLC, started out mortgage loans at a small custodian before co-founding Maryland-based mortgage lender and servicer Homeside Financial in 2014. Homeside Financial and its affiliated brands, which remain under the Lower Holding Co. umbrella, have funded more than $ 14 billion in loans and provide Lower with a network of channel partners of home builders and real estate agents.
The launch of Lower.com in 2018 provided a direct mortgage credit channel with a leaner, digital process that the company says will appeal to millennials in particular.
“We want to be the first sight for that millennial homebuyer who doesn’t know how it works,” Snyder tells Inman. “You want to buy a home, you’re tired of renting, you can go to Lower.com, and we’ll take your stress off the ground. We want to be number one in reducing home buyer fear in the country. “
For example, a Lower.com landing page aimed at Reddit users promises to “make you a homeowner” in “just five easy steps”.
“Mom and Dad have to pull themselves together,” says a toddler depicted in one of the steps. “Even I know our DTI ratio.”
In May, Lower announced a mobile app, HomeFund, that allows consumers to open an interest-bearing FDIC-insured deposit account to save for a home and earn a dollar-for-dollar match with the first $ 1,000 saved .
By providing bundled services as a lender, credit service provider, insurance broker, and deposit account, Lower can help more buyers and owners.
“We’ve been around for more than seven years and have doubled every year we wanted to – from closed volume to sales – and have increased it profitably over time,” said Snyder. Last year the company as a whole, including HomeFund, raised $ 5 billion in loans and this year it expects to fund $ 9 billion.
Agent recommendation platform coming in the first quarter of 2022
To keep growth on track over the next year, the company’s real estate agent arm Lower Realty LLC plans to launch a homebuyer broker matching service in the first quarter of 2022.
In connecting consumers with brokers, according to Snyder, Lower’s philosophy is to “optimize for the process and experience,” taking into account factors such as the type of property a homebuyer is interested in and the availability of brokers .
“We want to make sure they get along,” says Snyder. “What we’re building is a little more of a Match.com behind the scenes situation.”
According to Snyder, Lower is currently in agent-matching beta with 1,700 agents on a network spread across the country from Tampa, Florida to Los Angeles.
“We don’t have enough agents on our network, to be honest – this is something we really need,” said Snyder. “We’re getting the word out … and we want to make great strides in the next quarter.”
Top mortgage lenders like Rocket Cos., LoanDepot, and Better have all branched into real estate brokerage and property insurance to offer end-to-end bundled services to home buyers. But Snyder said his company could stand out from the crowd by incubating the next generation of homebuyers and making home ownership easier.
“It’s not a groundbreaking idea,” admitted Snyder. “For years there has been a bundling of services in many industries. You’ll be okay with bundling if it does two things: it’s cheaper, and it’s more convenient. So the execution must be out of the charts. And I think that’s where we differ. “
Instead of trying to make big profits on every component of a transaction, “we can make less on all of them and we benefit from the experience,” he says. “So you’re seeing a migration there – there are some other people doing that. We just hope to win by doing it. “
Snyder says he believes that competitors don’t “take cover off the ball when it comes to service,” and that Lower has an advantage in making home ownership easier.
“Rocket has been around for decades, so it’s harder for them to move with the latest technology,” claims Snyder. “You’re like Wells Fargo now. And Wells Fargo has a lot of bundling and a lot of stuff, but it’s Wells Fargo. “
Develop technology in-house or partner?
To ensure everything is seamless from a customer perspective, Lower develops much of its technology in-house, but isn’t afraid to partner with products like its HomeFund app.
HomeFund is based on an API-based payment processing platform from Galileo Financial Technologies with accounts at Evolve Bank & Trust in Memphis, Tennessee.
“We really want to build and own everything that affects consumers, because that’s our bread and butter. We will live and die by carrying out this experience, ”says Snyder.
So Lower teamed up with Galileo to provide the “middleware” for HomeFund, an API layer that connects a custom front-end built by Lower to the partner bank.
“We’re not really interested in being a real bank – we’re a mortgage lender, we have an incredibly strong balance sheet, but we don’t store deposits,” says Snyder. “But we want to control the experience.”
Lower also built its own custom documentation portal to make it easy to upload all documents related to a mortgage loan because “we haven’t found anything on the market that is anywhere near as compliant or as user-friendly as we wanted it to be. ”
“I think you’ll see more of us building more of these core components to speed up the process for our own team members rather than going on vendors,” says Snyder.
Navigate to compliance issues
The provision of bundled services raises some compliance issues. Rocket announced that the Consumer Financial Protection Bureau investigated last year whether its real estate brokerage arm Rocket Homes “was conducting any activity in a manner contrary to the Real Estate Settlement Procedures Act or RESPA.”
Rocket has since announced that it will hire internal agents in addition to referrals. It is better to do the same. Snyder says it is well aware of potential RESPA issues and able to manage them.
“We are not a brand new real estate fintech startup without background knowledge of RESPA and its complexity,” says Snyder. “We are the opposite of that. We approach this issue with compliance in mind. I just literally got off a Zoom call – a huge opportunity for us – and our General Counsel, who is a 30 year veteran, is in the introductory meeting. Because with many of these things you really have to go into it with open eyes. “
Lower’s motivation for providing agent matching is to “ease the pain of consumers who come to us and say they are buying a second home in Colorado and living in Philadelphia – they have no idea what the landscape of that market is like “. is. Instead of going to Google and trying to find out for ourselves, we’re just linking them [to a real estate agent]. It’s different from some of the big standalone companies like Homelight. We only associate them with one broker. It’s up to your choice. But it operates as a completely separate entity and company. “
With the mortgage market expected to see a major shift from refinancing to buying mortgages over the next year, lenders are eager to partner with real estate agents to build this side of their business.
Snyder says that when you include Homeside Financial in the mix, purchase credits are already 60 percent of Lower’s business, and historically it’s “closer to 70-30” purchase to refi.
On the direct consumer side, “we’re almost 50-50 buy-to-refi, which is almost unknown because it’s so difficult to conduct a buy transaction from one central location,” says Snyder. “We found that a lot has to do with making sure the organization is focused on the shopping business. There are time frames and complexities, and you can’t close out loans a day late. Then moving trucks are hit. “
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