Why Lower.com is more than mortgage rates

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Prior to announcing a $ 100 million Series A funding round in June and a naming rights deal with the Major League Soccer team, the Columbus Crew, Lower LLC had kept a relatively low profile as than direct bootstrap mortgage lender.

But there is a backstory to Lower that helps explain why the company thinks it can now position itself not just as a lender, but as “Everything for your home, for Lower”.

Lower LLC CEO Dan Snyder got his start in mortgage lending at a small depository bank, before co-founding Homeside Financial, a Maryland-based mortgage lender, in 2014. Homeside Financial and its associated brands, which remain under the umbrella of Lower Holding Co., have financed more than $ 14 billion in loans and provided Lower with a network of distribution partners of builders and real estate agents.

The launch of Lower.com in 2018 provided a direct mortgage channel with a more streamlined digital process that the company says is particularly appealing to millennials.

“We want to be the first glimpse of this millennial homebuyer who doesn’t know how it works,” Snyder told Inman. “You want to buy a house, you are tired of renting, you can go to Lower.com, and we will reduce your stress. We want to be the number one homebuyer anxiety reducer in the country. “

A Lower.com landing page aimed at Reddit users, for example, promises to “make you an owner” in “just five easy steps.”

“Mom and dad need to get together,” says a toddler pictured in one of the stages. “Even I know our DTI ratio. “

In May, Lower announced a mobile app, HomeFund, which allows consumers to open an FDIC-insured interest-bearing deposit account to save for a home and earn dollar for dollar on the first $ 1,000 saved.

By providing bundled services as a lender, loan manager, insurance broker and deposit account, Lower says it is able to help more buyers and homeowners.

“We’ve been working on it for almost seven years and have doubled every year the metric you want to look at – from closed volume to revenue – and we’ve grown it profitably along the way,” Snyder said. Last year, the company as a whole, including HomeFund, granted $ 5 billion in loans, and this year it plans to fund $ 9 billion.

Agent referral platform coming in Q1 2022

To help keep growth on track next year, the company’s real estate brokerage arm, Lower Realty LLC, plans to launch an agent matching service for home buyers in the first quarter of 2022. .

Pairing consumers with agents, Snyder explains that Lower’s philosophy will be to “optimize the process and the experience,” taking into account factors such as the type of property a buyer is interested in and the availability of agents.

“We want to make sure they get along well,” Snyder says. “What we’re building is a bit more of a Match.com situation, behind the scenes.”

Snyder says Lower is currently in agent matching beta, with 1,700 agents in a network spread across the country from Tampa, Florida to Los Angeles.

“We don’t have enough agents in our network, frankly – that’s something we really need,” Snyder said. “We’re getting the word out a bit… and we’re looking to make some big progress in the next quarter. “

Major mortgage lenders like Rocket Cos., LoanDepot, and Better have all moved into real estate brokerage and title insurance to provide end-to-end bundled services to homebuyers. But Snyder said his business can differentiate itself by incubating the next generation of home buyers and making homeownership easier.

“It’s not like it’s a revolutionary idea,” Snyder conceded. “There has been a consolidation of services in many verticals for years. You will accept bundling if it does two things: it’s cheaper and it’s more convenient. So the execution has to be off the charts. And I think that’s where we differentiate ourselves.

Rather than trying to make big profits on every element of a transaction, “we can earn less on all of them and we get a better experience,” he says. “So you’re seeing a migration to that – there are other people doing that sort of thing. We just hope to win in execution.

Snyder says he thinks competitors are “not putting the cover on service,” and that Lower has an advantage in making homeownership easier.

“Rocket, they’ve been around for decades, so it’s harder for them to move around with the latest technology,” Snyder says. “They are now like Wells Fargo. And Wells Fargo has a lot of bundles and a lot of stuff, but it’s Wells Fargo.

Build the technology internally or in partnership?

To make sure everything is transparent from the customer’s perspective, Lower is developing a lot of its technology in-house, although it isn’t afraid to partner with products like its HomeFund app.

HomeFund is built on an API-based payment processing platform provided by Galileo Financial Technologies, with accounts held at Evolve Bank & Trust in Memphis, Tennessee.

“We really want to build and own everything that is consumer oriented because it is our bread and our butter. We will live and die by performing this experiment, ”Snyder said.

So Lower has partnered with Galileo to provide “middleware” for HomeFund, an API layer that connects a custom front-end from Lower to the partner bank.

“We’re not really interested in being a real bank – we’re a mortgage bank, we have an incredibly strong balance sheet, but we don’t store deposits,” Snyder said. “But we want to control the experience.”

Lower has also created their own custom documentation portal to make it easy to download all the documentation associated with a mortgage, because “we haven’t seen anything on the market that is as close to being as compliant or as easy to use as we wanted it. “

“What I think you’ll see more of from us is creating more of these building blocks to speed up the process for our own team members, instead of using vendors,” Snyder says.

Navigate compliance issues

There are some compliance issues with the provision of bundled services. Rocket revealed that the Consumer Financial Protection Bureau last year investigated whether its real estate brokerage arm, Rocket Homes, “had conducted business in a manner that violated” the Real Estate Settlement Procedures Act, or RESPA. .

Rocket has since announced that in addition to providing referrals, it is hiring internal agents. Better to do the same. Snyder says he is well aware of the potential problems with RESPA and is able to deal with them.

“We are not a brand new real estate fintech startup without any experience with RESPA and its complexities,” said Snyder. “We are the opposite of that. We approach this thing with conformity in mind. I literally just got out of a Zoom call – a huge opportunity for us – and our general counsel, who is a 30 year veteran, is on the introductory call. Because a lot of these things, you really have to go in with your eyes wide open. “

Lower’s motivation for providing the agent match is “to help ease the pain of the consumer, who comes to us, and says he’s buying a second home in Colorado and living in Philadelphia – they don’t. ‘have no idea what the landscape of this market is. Instead of going to Google and trying to figure it out on their own, we just link them [to a real estate agent]. It’s different from some of the big stand-alone companies like Homelight. We simply connect them to a real estate agent. It’s up to them. But it operates as a completely separate entity and business. “

With the mortgage market expected to shift from refinancing to purchasing mortgages next year, lenders are eager to partner with realtors to grow this aspect of their business.

Snyder says if you include Homeside Financial in the mix, purchase loans already represent 60 percent of Lower’s business, and historically it’s “closer to 70-30” to buy for refi.

On the direct-to-consumer side, “we are almost 50-50 buy-to-refi, which is almost unheard of, due to the difficulty of making a buy transaction” from a central location, Snyder says. “What we’ve found is that a lot of it is about making sure the organization is fit for the buying activity. There are deadlines and complexities, and you can’t close loans a day late. Then the moving trucks are affected.

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