After setbacks, Better goes public with plan to scale ‘greater heights’

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Flush with more than half a billion dollars in new funding from a long-awaited SPAC merger, technology-based direct mortgage lender Better says it will hire mortgage loan officers, coordinators, processors and underwriters and “aggressively” partner with real estate agents to grow the business to “greater heights” than before.

More than two years after entering into an agreement to go public through a merger with Aurora Acquisition Corp. — a special purpose acquisition company (SPAC) — Better finally closed the deal Wednesday, opening what co-founder and CEO Vishal Garg envisions as a new chapter for the company.

The new public company resulting from the merger, Better Home & Finance Holding Company, will begin trading on the Nasdaq stock market Thursday under the symbols “BETR.”


Vishal Garg

Vishal Garg

On Wednesday, Better announced the deal would unlock $565 million in fresh capital, including a $528 million convertible note previously committed from affiliates of SoftBank and additional common equity from funds affiliated with NaMa Capital, formerly Novator Capital.

“There are 4,000 mortgage banks out there, interest rates are at the highest that they’ve been in 20 years, and housing supplies are at the lowest in 10 years,” Garg told Inman. “So we have the perfect storm brewing in the market, and this capital will provide us the ability to rebound from the depths of this market and continue to drive innovation to the consumer.”

Having shut down the company’s real estate brokerage arm in June, Garg said Better has moved “to a purely partner model” with respect to Realtors, pairing borrowers who come to Better to get preapproved for mortgages with agents in their local markets.

“We’ve been growing that program very aggressively … and hope to grow it dramatically over the coming years,” Garg said.

While Better is scaling up its mortgage production team, the company thinks it won’t have to grow its workforce as rapidly as it did during the pandemic-era boom in refinancing, said Nneka Ukpai, Better’s head of financial innovation.

At its peak in the fourth quarter of 2021, Better employed 10,400 people with 6,500 employees dedicated to mortgage production. By this summer, Better’s workforce had shrunk to 950 team members as of June 8, and the 400 working in mortgage production included 230 workers in India. About 150 Better team members worked in technology and product development, nearly all of whom were based in the United States.

“While a lot of other companies have sort of hunkered down to try to weather the storm, we’ve been investing heavily in our technology, we’ve been investing heavily in automation,” Ukpai said. “So for us to scale in the way that we did last time, we would really be able to do so by hiring a fifth of the people that we hired last time, because we’ve invested so much [in technology] over the course of the last two years.”

Better’s boom and bust

Better boom and bust 2019 2022

Source: Aurora Acquisition Corp. regulatory filing

During the COVID-19 pandemic, Better was popular with homeowners looking to refinance their mortgages to take advantage of historic low rates.

Better made a name for itself by providing an easy online application process and offering competitive rates. But after originating $58 billion in mortgages in 2021, Better saw mortgage production plunge by 80 percent last year to $11.4 billion, when interest rates soared as the Federal Reserve switched into inflation-fighting mode.

Like other mortgage lenders, Better has tried to make the pivot to providing purchase loans to homebuyers, introducing a new product, the “One Day Mortgage,” at Inman Connect New York in January.

“One Day Mortgage is a manifestation of all the great work that we’ve done in technology and investing in our rules engine, Tinman, to enable someone to go from click to commitment letter in one day,” Garg said. The new funding from SoftBank “will allow us to grow One Day Mortgage and enable it to reach a lot more consumers in 2024 and beyond, and allow Better to come back to the same, and then greater heights, than it had before.”

While the One Day Mortgage doesn’t get borrowers to the closing table that quickly, “we believe that we can eventually get from click to fund in one day, pending some of the regulatory challenges that it creates,” Garg said. “We look forward to making the One Day Mortgage truly a one-day mortgage process in the future, and we’re going to continue to drive towards that.”

With the rollout of the One Day Mortgage, Better no longer sees a need for a cash offer product.

“We used to have cash offer products but with One Day Mortgage, you don’t need a cash offer anymore,” Garg said. “With a one-day mortgage commitment letter, it’s as good as a cash offer, if not better.”

Garg said the influx of SPAC merger cash will also help Better continue to compete for customers on price — a tactic that helped wholesaler UWM surpass Rocket Mortgage as the nation’s biggest mortgage lender last year.

“On average, Better’s rates are about 45 basis points lower than the mortgage industry average,” Garg said. “So on a $400,000 house, that’s $1,800 a year of savings to the consumer. We’ve always been extremely competitive on price, and the additional proceeds will allow us to be even more competitive on price than we have been before.”

Companies executing SPAC mergers are sometimes stung by early share redemptions — digital title and closing provider Doma saw nearly $295 million in expected proceeds evaporate when it closed its 2021 merger. Garg said the capital pledged by SoftBank, a multinational investment holding company, “is fully committed, so there’s no redemptions.”

But the consummation of the merger with Aurora Acquisition Corp. does not necessarily mean that the SPAC market is poised to make a comeback as an avenue for companies to go public, Garg said.

“The SEC process just took two years,” was all Garg cared to say about why the May 10, 2021, merger agreement with Aurora was amended six times over two years — most recently on June 23 — before the deal closed. The merger agreement was amended three times in 2021 alone, as Better’s business shrank and losses mounted.

After generating $172 million in profits in 2020, Better racked up a $301 million net loss in 2021 and an $889 million net loss in 2022. By the first quarter of this year, Better had trimmed its losses to $89.9 million, down from $329 million in Q1 2022.

During the second quarter of this year, Aurora Acquisition Corp. notified investors that it had received “a voluntary request for documents” from the Division of Enforcement of the U.S. Securities and Exchange Commission, which informed Better that it was conducting an investigation to determine if violations of federal securities laws had occurred.

“On Aug. 3, 2023, SEC staff informed Aurora and Better that they have concluded the investigation and that they do not intend to recommend an enforcement action against Aurora or Better,” Aurora informed investors in a regulatory filing that day.

Nneka Ukpai

Nneka Ukpai

“We filed multiple amendments to get this across the finish line, and we’re happy to be able to share that the SEC effectively cleared us and closed any inquiries that they had with no findings,” Ukpai said. “So that cleared the way for us to go public.”

NaMa Capital managing partners Arnaud Massenet and Prabhu Narasimhan, who held executive roles at Aurora, will serve on Better Home & Finance’s board of directors.

“When we launched Aurora in March 2021, we did so to find a high-quality, tech-focused, business disrupting the status quo in its sector,” Massenet said in a statement. “Through our business combination with Better, we have now successfully fulfilled that aim and, over the past two years, Aurora has worked to deliver over $1.3 billion to Better’s balance sheet. We believe this transaction will deliver long-term value for our shareholders and we look forward to being part of the next stage of this journey.”

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