Compass Inc. is breaking into the multi-billion-dollar mortgage lending industry with the help of Guaranteed Rate, Inc.
On Tues., July 13, the two companies announced that they are teaming up to launch a tech-focused mortgage origination company called OriginPoint. According to Compass and Guaranteed Rate executives, the venture seeks to provide a faster, more seamless and transparent buying and selling experience to loan officers, agents and clients.
“With interest rates creeping up, limited housing supply and refis slowing down, right now couldn’t be a more perfect time to hire the best of the best of the top loan officers and sales leaders throughout the country,” said Guaranteed Rate Founder and Chief Executive Officer, Victor Ciardelli, in a statement.
The Chicago-based company is one of the nation’s five largest retail mortgage lenders. Guaranteed Rate is coming off a record-setting year after funding more than $73 billion of total loan volume in 2020.
Guaranteed Rate will merge its digital platform with Compass’ suite of AI-driven cloud-based software to drive efficiencies throughout every step of the mortgage process.
Compass indicated that the venture would unite agents with loan officers to reduce consumer uncertainty in the home-buying process.
“Buying a home is the most emotionally and financially significant decision of most people’s lives and the role of the agent is to make the process as stress-free as possible,” said Compass Founder and CEO Robert Reffkin in a statement. “OriginPoint brings together two digital-first companies to deliver a mortgage product that provides a seamless and transparent experience for agents and their clients, which ultimately leads to a simpler real estate transaction for everyone involved.”
Compass employs more than 22,000 agents across hundreds of cities around the country. The collaboration comes months after the New York-based brokerage firm went public on the New York Stock Exchange.
Since launching its IPO, Compass reportedly earned $1.1 billion during its first-quarter report in May—an 80% increase in revenue from the same period last year.
That appeared to be largely due to the surge in activity in the housing market during the spring market frenzy. Compass reportedly took a hit in May, with shares dropping by almost 30% from their debut price of $20.15.
Shares are currently priced at $13.35 as the company appears to be struggling to regain ground since its IPO launch.
OriginPoint will originate mortgages for Compass’ clients and clients of other brokerages. Services will be available to consumers in every market that Compass operates in.
Loan originators who join OriginPoint will be able to leverage the growth-driving innovations developed by Guaranteed Rate.
Some industry leaders contacted by RISMedia indicated the alliance between Compass and Guaranteed Rate and the New York brokerage’s ingress into the mortgage origination industry isn’t surprising.
“I think it’s smart of them to partner with a company like Guaranteed Rate who is obviously an industry leader,” says Anthony Lamacchia, CEO of Lamacchia Realty.
Representatives at Realogy and Prosperity Home Mortgage shared a similar sentiment, adding that the move could be a boon for Compass’ profits.
“I expect that they need a way to benefit from the mortgage quickly, so I don’t think they would’ve gotten the joint venture out if they could’ve built their own company, but that would have taken years to do,” says Tim Wilson, president and CEO of Prosperity Home Mortgage. “In the mortgage business, the real estate environment is a quick way to add to earnings, but they have somebody on the outside controlling their customer experience.”
“Given Realogy’s proven mortgage success over the past few years, we are not surprised other companies in the industry would attempt to replicate our model,” said a Realogy spokesperson. “While Guaranteed Rate has existing brokerage relationships, together, our joint venture delivers industry-leading results and profitable growth anchored in Realogy’s powerful size and scale.”
Compass adding a mortgage arm to their business model makes sense, according to Joshua Harley, CEO Fathom Realty’s CEO, which recently entered the mortgage lending industry earlier this year following a few big-ticket acquisitions.
“We wanted to better control the quality and experience,” Harley says. “An agent’s reputation is helped or harmed by the lender they refer, and by owning our own mortgage company, we can better ensure a positive client experience and ultimately increase future client referrals to our agents.”
“The modern brokerage must create the opportunity to combine the best possible client and agent experience with leveraging the monetization of the transaction,” Harley continues. “There are only a few brokerages that will be able to do this at scale, and I welcome Compass to that mix.”
This is a developing story. Stay tuned for updates.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.
