Mortgage

Redfin buys Bay Equity to up its purchase mortgage game

Redfin buys Bay Equity to up its purchase mortgage game
Written by Publishing Team

Redfin’s acquisition of Bay Equity Home Loans strengthens the real estate company’s presence in the mortgage space at a time when buyouts are expected to dominate the market.

“Our long-term vision is to bring together lending and brokerage services with new ways of moving from home to home,” Redfin CEO Glenn Kellman said in a press release. “Buying Bay Equity not only gives us the scale to better execute in Phase 1 of this vision; it also gives us scope to start early in Phase 2, which will allow Redfin customers to purchase homes that they could not obtain through an independent broker or lender.” .

Redfin will pay approximately $135 million, two-thirds of it in cash and one-third of stock to Bay Equity, a mortgage banker based in Corte Madeira, California.

As Redfin pays a premium to Bay Equity, with a tangible book value of twice that, “particularly in what will be a bearish year for mortgages in 2022, the relatively strong buying volume should open up well, allowing Redfin to benefit from its underlying brokerage Yigal Aronian, an analyst at Wedbush Securities, said in a research report:

However, due to this deal, Redfin will eliminate 121 of the 250 existing positions from its existing mortgage lending business.

These employees, who work primarily in sales support, capital markets and operations locations, will have the opportunity, if they choose, to find another role at Redfin.

“Many of these people are the pioneers who helped build a Redfin mortgage from scratch and we owe them a debt of gratitude,” Adam Weiner, Head of Real Estate Operations, said in a press release. “Our transition team will provide the white glove service our employees deserve to make their transition to a new position at Redfin or a new company as smooth as possible.”

The remaining Redfin Mortgage employees will move to Bay Equity.

Redfin Mortgage started working in 2017. The parent company is Not the only real estate company To find out the advantages of conducting its own lending process. Purchased Zillow Mortgage Lenders in America In 2018, originally to support the now discontinued iBuying business. Keller Williams executives bought the entities now known as Keller Mortgage. Remax took a different route, founding the Motto Mortgage Company.

However, “Redfin has been struggling to increase its mortgage capacity throughout 2021 due to a record year in the mortgage industry, first around improving the technology infrastructure to service more loans, then hiring more mortgage originators and sales staff,” Aronian noted. . He added that the Bay Equity purchase brings Redfin closer to developing a full-fledged residential real estate product offering.

Bay Equity originated in the form of $8.5 billion in mortgages last year, of which $4.5 billion came from purchases. It has 1,200 employees and is licensed in 48 states.

This dwarfs Redfin Mortgage, which made $985 million last year, mostly in purchase loans; The company refinanced only $3 million. It is licensed in 24 states.

Bay Equity also offers a full product suite, while Redfin Mortgage only offers matching loans.

Purchase loans are expected to dominate the scene this year, with industry economists Predict the size of the recording for this category. But this will not fully offset the decline in the op’s assets.

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