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1 Mortgage IPO I'm Watching Closely

By Matthew Frankel, CFP® - Updated Jun 23, 2021 at 8:09AM

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There have been several IPOs by mortgage originators, but this one stands out.

There has been no shortage of mortgage companies going public over the past year or so, and with the record high loan origination volumes we've seen, it isn't much of a surprise. However, tech-focused mortgage company Better recently agreed to go public via SPAC merger with Aurora Acquisition (AURC 0.00%), and in this Fool Live video clip, recorded on May 17, Fool.com contributor Matt Frankel, CFP, explains to Industry Focus host Jason Moser why this one could be the standout of the group.

Matt Frankel: Well, if you remember, all of these mortgage companies that have gone public in the past year or so. I've really had a skeptical tone about them. Everyone's refinancing, of course the numbers look great, things like that. Now, there's one that just announced they're going public through SPAC, off course because it's 2021, so that's how you go public these days. It's called Better. It used to just be called Better Mortgage; now it's just called Better. They're going public through a merger with a company called Aurora Acquisition, ticker symbol is AURC.

Jason Moser: Sounds cool.

Frankel: I used Better to refinance my home and couldn't have had a better experience of something. That's not why I'm interested, not because I'm a customer. They really deliver on their claims. They aim to take the whole mortgage process online. They close their average loan in 21 days. The industry average is 42. That's pretty impressive. They close loans in as little as two weeks. They do everything online.

I guess you can't really put too much stock into their growth. Their loan volume grew 490% last year. That's because everybody was refinancing, and they specialize in refinancing. I think I remember you said you refinanced. I refinanced. Everybody refinanced.

Moser: Yeah, absolutely.

Frankel: They also provide services like title insurance, homeowners insurance. They aim to take everything into like a one-stop portal. The word is really getting out on them. They do, I mean, as the name implies, they just do a better job. I did everything online. The only time I think I interacted with a person was when the closing attorney showed up at my house. It was such a smooth process. In my lifetime, including investment properties, I have obtained about a dozen mortgages. This was smoothest process by far. So I'm watching them.

They're backed by SoftBank (SFTB.Y -4.03%). They have some pretty impressive backing. The deal values it at $7.7 billion, which is toward the high end of mortgage originators. But not, I mean, Rocket Mortgage (RKT -6.89%) is just a bigger company than they are. I think they have a big opportunity. Not just the online aspect. It's great for customers. It also means higher margins, potentially. Same reason that online banks produce higher margins than, like, a Wells Fargo (WFC -1.71%) or JPMorgan (JPM -2.48%).

Recent SPAC IPO, they didn't really pop that much after the announcement, probably on valuation concerns, if anything. But that's one that I'm keeping an eye on just because, out of all the mortgage lenders that we talked about that have gone public, there has been Rocket, there has been United Wholesale (UWMC -0.50%), there's been a bunch of them. This is by far the most disruptive of them. That's why I'm keeping an eye on it.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jason Moser has no position in any of the stocks mentioned. Matthew Frankel, CFP owns shares of Wells Fargo. The Motley Fool recommends Softbank Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Aurora Acquisition Corp. Stock Quote
Aurora Acquisition Corp.
AURC
$9.85 (0.00%) $0.00
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$118.63 (-2.48%) $-3.01
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$45.35 (-1.71%) $0.79
SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
SFTB.Y
$20.71 (-4.03%) $0.87
Rocket Companies, Inc. Stock Quote
Rocket Companies, Inc.
RKT
$9.73 (-6.89%) $0.72
UWM Holdings Corporation Stock Quote
UWM Holdings Corporation
UWMC
$3.95 (-0.50%) $0.02

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