Controversy has reared its head once again at Better.com after the company began cutting more than one third of its workforce following a tech mishap.
The New York-based start-up fired 3,000 people—nearly 35% of its workforce—on March 8th after the online mortgage company accidentally sent severance pay slips to a handful of employees too soon, according to a statement sent to RISMedia.
“Despite careful planning, a small number of employees were unintentionally notified of their separation from the company ahead of schedule when severance payment information was made available through either our internal payroll system or their financial institutions,” the statement read. “This was certainly not the form of notification that we intended and stemmed from an effort to ensure that impacted employees received severance payments as quickly as possible.”
Better also said it will make personal, “one-to-one calls” to affected U.S. employees to “provide every person affected by layoffs with information about this announcement and the significant financial, healthcare and transition support Better will be providing.”
However, the damage has already been done as affected employees wasted little time announcing their fates and subsequent search for new employment on social media.
“Hi everyone—like so many others flooding my news feed, I was laid off from Better.com today. It’s been a wild and crazy ride, and I look forward to finding a new place to grow my career—hopefully, one that values its employees’ hard work more than my previous employer did,” wrote Devyn Speed, a licensed mortgage loan originator in a LinkedIn post
Michael Ametrano, mortgage loan consultant at Better, echoed similar sentiments in a LinkedIn post of his own, stating that he learned of his firing from outside sources rather than the company.
“I was notified by the news first, and then my laptop shutting off second,” Ametrano wrote. “Although it wasn’t my decision, I do believe that everything happens for a reason, and I think this was meant to be.
Those out of a job this week are expected to get 60 to 80 days of severance, three months of COBRA health care coverage paid by the company, and support from a career transition firm, Randstad RiseSmart, according to a statement from Better.com.
The decision and subsequent misstep on Better’s part are arguably as controversial as the last time the online mortgage company laid people off in December 2021, when CEO Vishal Garg fired 900 employees—or 9% of his company’s workforce—over a now-infamous Zoom call.
The company faced a barrage of negative press and scrutiny over the incident, leading Garg to leave nearly a month later before returning to his role at the company.
At the time, Garg cited a shift in the lending market, performance and productivity as reasons behind his decision.
Fast forward to the company’s recent cuts, and Better CFO and interim president Kevin Ryan claimed that cuts were because the company “had to adjust to volatility in the interest rate environment and refinancing market,” in a March 8 letter to employees formally announcing the layoffs.
Ryan also admitted in the letter that the decision was driven heavily by “the headwinds affecting the residential real estate market.”
Better was among several mortgage lending companies that benefited from the past two years of hyperactive home buying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production.
However, as mortgage rates began to climb and the refinancing market—a large portion of Better’s business model—began to shrink in 2021, forcing the company, among others, to cut staff.
U.S. single-family mortgage originations are expected to decrease dramatically in 2022, falling from the sugar highs of 2020 and 2021 by $1 trillion. The Mortgage Bankers Association forecasts that refinance originations will come in at $870 billion in 2022, down from $2.32 trillion and $2.63 trillion in 2021 and 2020, respectively.
In the recent document the company filed with the U.S. Securities and Exchange Commission, Better estimated on a preliminary basis that its 2021 Q4 revenue dropped between 17% to 22% sequentially versus the previous quarter. The company also forecasted an annual revenue decline of up to 29% compared to 2020.
While Better has been trying to mitigate its financial woes, the company has also publicly acknowledged that “company culture” stemming back to Garg’s Zoom layoff debacle and the media blowback that the company received as a result, are ongoing challenges.
In its SEC document, Garg’s move, “affected Better’s management and leadership, has detrimentally affected Better’s productivity and financial results and has disrupted certain third-party relationships.”
The company noted that it hired a third-party company to conduct a cultural assessment following the incident, which “identified a number of areas of its workplace culture that require improvement,” including the December layoff incident.
The company claimed it set out to address those culture challenges in the document. However, in the months since its December layoffs, Better lost almost a dozen high-ranking executives who left the tech company for undisclosed reasons.
Those departures and layoffs have also come as the New York-based start-up looks to go public through a special purpose acquisition company (SPAC) merger with blank-check firm Aurora Acquisition Corp. in a deal valued at $7.7 billion.
Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas to jgrice@rismedia.com.
