Loans

Zillow All-In With Mortgage Origination

Zillow is focusing more on the mortgage market, making loans to buyers who use the company’s app.

According to a report in GeekWire citing an interview with Zillow co-founder and chief executive Rich Barton, Zillow plans to create an Amazon-like experience for mortgages; mortgage origination will be tied into the app similar to how payments are integrated into Uber. Zillow plans to add the mortgage business to its financial reports starting in the second quarter.

For Zillow, mortgage origination is part of the company’s efforts to expand further in the real estate market to create better experiences for consumers when they are searching for and buying a home. According to the report, Zillow has been originating mortgages for the past few months after buying Mortgage Lenders of America. Citing a 10-K filing, Zillow said it paid $66.7 million in cash for Mortgage Lenders of America last year. It originated 4,000 home loans last year, noted the report.

Building on that deal, over the coming years Zillow plans to boost the mortgage business; GeekWire reported it’s aiming to originate 3,000 home loans each month in the next three to five years. Zillow expects that following the integration of Mortgage Lenders of America it will originate loans on about one-third of the homes it sells, reported GeekWire, noting that for this year it’s aiming to earn $100 million to $115 million in revenue from its mortgage business, bringing annual growth of between 24 percent and 44 percent.

“This is why we founded Zillow, to actually change the way people bought and sold houses, and the way they found a new place,” Barton told GeekWire. “This was our original conception, something like this to actually solve the real estate headaches that we were experiencing, that our moms and sisters and brothers were experiencing.”

The strategy isn’t without risks. In a 10-K Zillow highlighted the risks from focusing on the mortgage business, saying it may have to raise money to fund the expansion of originations and home sales and that there could be conflicts with some of Zillow’s mortgage partners.  Nevertheless, Barton told GeekWire he is excited about the prospects. “My eyes are wide as I look up in the sky and see the moon and I want to go,” Barton said. “To me, this is one of the more exciting opportunities I’ve seen in my business career and it’s why I’m recommitting in all kinds of ways.”

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