A recent Housing Wire article reported that on October 31, 2018, Zillow completed the acquisition of licensed mortgage lender MLOA to the tune of $66.7 million in cash. According to Zillow CEO, Rich Barton, the acquisition will bring them closer to their goal of creating a better consumer experience during real estate transactions. Zillow plans to grow their annualized revenue in what they refer to as their “home segments” to $20 billion. Here is a summary of what Housing Wire found.
To reach their goals, Zillow will require the purchase of 5,000 homes and will have to originate 3,000 mortgage loans each month. The average national new mortgage loan is $260,000. If they meet their goal of 3,000 loans per month, it would provide $9.4 billion in annual mortgage originations. With numbers like this, Zillow Home Loans would become one of America’s largest retail mortgage originators.
Barton admits that their move into the mortgage lending business could harm their relationships with their mortgage advertisers, which in turn could negatively impact their financial condition.
With Zillow acknowledging this potential threat, it seems they are still willing to take the risk. That could be an indication that they want to move away from advertising and focus on generating revenue from the real estate transaction process.
In fact, with an all-inclusive online platform, Barton believes they can become “the winner in online real estate 2.0,” as quoted by Housing Wire.
House Financial Services Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) sent a letter to the National Association of Federal Credit Unions (NAFCU) in January. The letter calls on lawmakers to help ensure the growing fintech sector does not overtake regulated financial institutions.
If mortgages originated by fintech lenders are not regulated in the same manner as regulated financial institutions, it can make it difficult to compete. Because fintech lenders are involved in more steps of the real estate transaction, they also have more customer data to contain. However, at this time, they do not have to worry about the intense Gramm-Leach-Bliley Act cybersecurity examinations that other depositories face.
Zillow announced they would expand their Zillow Offers platform to start buying and selling homes in five new markets. So, by the end of 2019, Zillow Offers will have spread to at least 15 major metropolitan American markets in just a little over a year of starting up.
As the average homebuyer becomes younger, comfort levels with online transactions continue to grow. Today, Zillow accounts for 80% of the homes viewed online, with 195 million monthly unique visitors.
With this colossal following, Zillow is ramping up its website to be more user-friendly while promoting their own services. They have been placing their own for-sale homes above competing listings. They have also improved their Zestimates tool, a primary driver of their web traffic. Their goal is to help improve the familiarity of their site so that visitors are more comfortable using Zillow Offers and Zillow Home Loans.
Zillow is poised to get a stronghold on the market while the rest of the mortgage industry struggles with the challenge of heavy regulations and digital transformation.
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