What Redfin's acquisition of Bay Equity means for both companies
January 25, 2022 2:53 PM
Bay Equity also adds four states — Delaware, New Jersey, Pennsylvania and Ohio — in addition to the District of Columbia to its market from Redfin Mortgage.
The acquisition of Bay Equity needs state approvals, which are expected to come by April or May.
National Mortgage News spoke with CEO Brett McGovern about the genesis of the transaction, and what it means for both companies.
The following questions and answers have been edited for length and clarity.
How did the deal with Redfin come together?
We were looking for a way to differentiate Bay Equity from our competition, especially looking into the face of a possible rising rate environment. In September of last year, Redfin's investment banker cold-called us and said she was working with a fintech company we would know of. They were switching strategies, focusing on purchasing a mortgage company to fulfill all the opportunities that they have on the real estate side. And so we said "yeah, sure, we'll talk to you guys" and discussions commenced from there.
This is coming at a time when the industry is switching to a purchase market. How much of that figured into the decision to tie in with Redfin?
That's on everyone's mind. That's definitely part of it, but we're taking a bigger view than just the next market cycle. And once we got to talking to Redfin, they've got a vision of a one-stop-shop for real estate transactions where people are on their site. The bigger picture is to have a better, more efficient customer experience where the documents are shared in a deal room and that people can efficiently find, purchase and finance a home. That big vision is what we wanted to hitch our wagon to. Without a doubt we knew that that would help not only our originators heading into a tough market, but also protecting the jobs for the operations people at our company as well. In a declining, slowing, market, to have that trajectory of tens of thousands of potential new customers being introduced to our branches and our loan officers and having our operations people fulfill those loans while other lenders are without a doubt going to be hunkering down and potentially downsizing. We've been through those markets, that's not fun. As we all know, anybody who's been in our business long enough knows it's no fun to manage through a down market.
What will happen with Redfin's existing mortgage operation?
They are going to be closing down their mortgage division. Unfortunately, that's going to bring some layoffs within that group. We are hiring as many of those people as we thought prudent, and it includes their sales force. They have 25 loan officers and they're going to be placed within current Bay Equity branches. We're going to help train them up and get them assimilated into a full offering of what we bring to the table for the Realtors, which they're also excited about. Then we're hiring a number of ops personnel, some IT developers, underwriters, funders and some processors. We're going to integrate quite a few of the people over to our side. And Bay Equity is going to then be the mortgage division for Redfin.
So Bay Equity is not going to be branded as Redfin?
That's right. We've set this up so it's really a non-event for our existing salespeople. Same brand, same leadership, same technology, same ops teams, really no change at all. No comp changes. The only thing that's changing is we're introducing a massive purchase customer acquisition strategy by having our local folks interfacing with the local real estate agents of Redfin.
Is there significant overlap between Bay Equity and Redfin Mortgage?
There's only a couple states that they were in that we were not in and we're currently getting those state approvals. Mostly, it's a good match as far as coverage. One of the reasons they also wanted to do this is they had 25 loan officers for Redfin Mortgage that were trying to service 2,400 real estate agents around the country. They just didn't have the sales coverage to be effective, and they didn't have the product mix. By doing this, they fast forward themselves years into the future with a fully built out mortgage advisor sales force that is going to be able to pair up with their Realtors.
Anything else that you want to add?
We thought the culture fit was really a great match between Bay Equity and Redfin. [Ant] it couldn't have been a better match as we found out throughout the due diligence process and getting in there into the weeds with them. There wasn't a contentious phase of getting from introduction to signing. It was just real smooth.
