Better, still unprofitable, adds distributed retail ops

Better Home & Finance hasn't turned a profit since going public, but executives remain bullish on the lender's expanding footprint. 

The company reported a $54.1 million net loss in the third quarter, its fifth consecutive earnings in the red since its Wall Street debut last August. Wednesday's results were less favorable than the prior quarter, but reflected a marked improvement from a $354 million loss in its debut earnings a year ago. 

"We're not as far away as some people think," Chief Financial Officer Kevin Ryan told National Mortgage News. 

Executives touted a busy quarter, during which they axed a swanky office lease; onboarded distributed retail operations; launched television ads; and in October unveiled an artificial intelligence voice assistant. 

Better recorded just over $1 billion in funded loan volume between July and September, a quarterly and annual improvement. Its $29 million in revenue was down from the spring, but was ahead of last year's $4.9 million mark. Gain-on-sale margins wavered at 203 basis points this year, also down quarterly but up annually. 

The lender, which Garg said has completely pivoted from a refi machine, reported 71% of purchase volume in its direct-to-consumer operations. Like other originators during this high-rate cycle, Better saw increasing home equity line of credit activity at 16% of its volume.

The company spent more money this summer on its loan production staff, and hired the executive team of Neo Home Loans to build a distributed retail channel. That shop has 67 active branches and reported over $2.7 billion in loan origination volume last year, according to publicly available data. 

Garg said Neo, which will transition to Better on a branch-by-branch basis, was interested in the efficiency of Better's Tinman loan origination system. The firm's locally-based loan officers will help with Better's monthly 50,000 pre-approval starts. 

Better's move to terminate its World Trade Center lease in the third quarter is expected to save the company $10 million through 2030. The lender meanwhile opened offices in Dallas, Detroit, Irvine, California and Charlotte, and will retain corporate headquarters in New York City.

The company during its earnings call also demonstrated Betsy, its artificial intelligence voice assistant, which is handling all inbound customer calls. Garg compared its workload to Better's operations in 2021, when during the refi boom it was spending over $100 million a year on over 1,500 loan assistants. 

At the end of September, Better counted $480 million of cash, restricted cash, short-term investments and self-funded loans. It also has three warehouse facilities totalling $425 million. Over the summer it completed its 1:50 reverse stock split, and its stock was trading at $14.32 midday Wednesday, down slightly after the earnings. 

Executives said they're targeting profitability in the medium-term. Garg said the company's earnings are volatile because of its lack of mortgage-servicing rights transactions. Those holdings allow for recapture opportunities but also large quarterly markdowns. 

"The reason we can't pinpoint a very specific quarter (for profitability) is that the mortgage market is partially a function of things outside our control, around macro," said Ryan. "If there's a much stronger macro it'll happen faster. If mortgage rates stay in the 7s, we'll still get there. It may take a little longer."