Better Home & Finance is hyping up its vision of an artificial intelligence-powered mortgage future, despite coming off yet another large quarterly and annual loss.
The digital lender posted a $206 million net loss in 2024, trimming its nine-figure deficit in 2023 by 61%. It also lost $59.2 million in the fourth quarter, in a stretch of quarterly deficits going back to the company’s Wall Street debut in August 2023.
The New York-based mortgage player is still a billion-dollar originator, recording 11,800 home loans last year for $3.6 billion in volume, a 20% yearly increase. Its fourth quarter funded loan volume was $936 million, slightly less than the third quarter result but nearly double its performance during the market’s nadir in late 2023.
Executives in Wednesday’s pre-market earnings call, in response to investor analyst questions about financials, described corporate cost reductions, including a pullback of overstaffing and marketing late last year. They’re projecting profitability in the “medium term”, and have cut items including business in the United Kingdom and a Manhattan office lease.
They touted expected future gains from AI enhancements to originations, as Better’s gain-on-sale margin rose to 217 basis points last year, from 195 basis points in 2023.
“We believe the potential for our customer to be fully underwritten for a mortgage across credit, income, assets, title, and appraisal within minutes of going into a contract on a home is not very far away,” Garg said during the call.
The company’s 1-day mortgage product accounts for 70% of its volume. Better’s AI review can also process the lock-to-commitment process in less than a minute, which it’s done for 40% of its transactions, Garg said. The lender is also enabling instant title and appraisal for a small percentage of its locks.
Better said its updated AI voice assistant Betsy is also available around the clock and could reduce sales cost per loan by $2,000 and operations costs per fund by $1,400. The lender, among other business discussions, is in term sheet discussions with a “top-5” servicer to private label Betsy and Better’s Tinman loan origination system to help the servicer recapture business, Garg said.
“We’ve gotten tremendous reception at the senior-most levels across the mortgage landscape,” Garg said to National Mortgage News. “Companies whose CEOs are preparing for refinances to come back, but they don’t know when, they don’t know how, and they certainly don’t want to staff up to do it.”
The outlook is a turn for Better, which enjoyed explosive growth during the refinance boom powered by a significant staff up but difficult comedown. The firm reported 1,250 team members as of Dec. 31, 2024 in its annual report, compared to 10,400 team members at the company’s peak in the fourth quarter of 2021.
“Right now Betsy can do all of the functions that those refi sales people were doing in 2020 at zero, near-zero marginal cost,” said Garg during the call. “That means we don’t have to hire 3,000 people. … I think there’s just extraordinary scale that we’ve now built into the product.”
Better has also onboarded 110 Neo Home Loan originators across 53 branches, and that retail arm has recorded over $90 million in funded loan volume since January, it said. Neo is also reporting average gain on sale margins of 365 basis points. The retail operation is the subject of a poaching lawsuit from Luminate Home Loans, in a pending lawsuit.
The lender is sitting on over 2 million pre-approvals from the past few years, interactions Garg compared to some mortgage players’ mortgage servicing rights books.
The CEO also pitched expansion opportunities for retail players like Neo looking to scale. He lauded sophisticated competitors like Rocket and Loandepot, but characterized other competition as loan officer or mortgage broker staffing platforms that have benefited from “the lack of any technological sophistication within that universe.”
“I think there’s a pretty heavy tax that these platforms charge to the incumbent loan officer and I think we can free them from that,” said Garg.
