US-based online real estate portal, Zillow Group, is going to be dipping into the mortgage origination business. The company will create loans for people looking to buy the same homes that they find in the Zillow marketplace.
It’s part of a broader transformation that promises to make Zillow Group a drastically different company than it was just a few days ago. The mortgage news was largely overlooked amid two other major changes announced by the company: Co-founder Rich Barton’s return as CEO, and Zillow’s announcement that it will go all-in on direct home sales.
Zillow is taking a cue from companies like Amazon, Uber and others that have created a “one click, magic happens” expectation, says Barton. That’s what the new Zillow is trying to offer for buying a house, with simplified mortgages tied in, “just like payments are integrated into Uber.".
In a telling sign of its ambitions in the mortgage business, Zillow will add a new segment to its financial reports, starting next quarter, focused on home loans. That includes some existing Zillow offerings, such as a marketplace that connects borrowers and lenders, and its new undertaking of originating its own mortgages.
Mortgages are part of Zillow’s overall shift from media and advertising to “moving further down funnel and closer to the real estate transaction to create better consumer experiences,” according to its annual 10-K filing with the U.S. Securities and Exchange Commission. Headlining this shift is Zillow Offers, the direct home sales initiative that Zillow kicked off last year, but the move into mortgages is another major indication that Zillow wants to get into every aspect of buying a home.
Zillow has been quietly originating mortgages for a few months, following the acquisition of Mortgage Lenders of America last year. At the time of the deal, Zillow didn’t say how much it spent on Mortgage Lenders of America. But the 10-K filing reveals the price: $66.7 million in cash. Mortgage Lenders of America originated approximately 4,000 home loans in 2018 across 40 states, or roughly 333 per month.
Over the next few years, Zillow will kick its mortgage business into high gear. The company aims to originate 3,000 home loans a month within three to five years, nearly 10 times the amount Mortgage Lenders of America is producing. Following through on the integration with Zillow Offers, the company expects to originate loans on one-third of all its home sales.
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