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This Upcoming SPAC IPO Expects to Grow Revenue by 650% by 2023

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Could this mortgage disruptor actually achieve its ambitious targets?

Innovative, tech-focused mortgage lender Better is set to go public via a SPAC merger with Aurora Acquisition Corp. (AURC 0.10%). Better's recent results have been extremely impressive, and the company is expecting revenue to multiply several times over in the next few years.

In this Fool Live video clip, recorded on Sept. 27, Fool.com contributors Matt Frankel, CFP, Danny Vena, and Jon Quast discuss Better's business and whether its growth projections are realistic or perhaps a bit too ambitious. 

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Matt Frankel: This is Better, the mortgage company. I don't know if either of you refinanced your house last year. I think everybody who owns a home refinanced it in the past 18 months or so. Some twice.

Danny Vena: If they were smart. 

Frankel: Right. Some did at twice that I know of. Better is a mortgage lender. They specialize in refinancing, so as you can imagine, they had a fantastic 2020. They also tried to kind of try to leverage their technology to do mortgages better. I used Better for my refinancing in 2020. That's what first got the company on my radar. The name holds water, it was a better company or a better process. Better is getting ready to go through SPAC to answer Kim's question that he just put in the chat.

Better is getting ready to come public through SPAC. They are still trading under their SPAC symbol, Aurora Acquisition Company. Ticker symbol AURC right now, although we write that last so you might not want to enter that into your buy button on your brokerage. They do mortgages, they also provide a realtor matching service. If you don't already have an agent, they will do that without you having to find one they offer title insurance, homeowners insurance services, they're planning on launching home improvement loans in the second half of the year.

They are also planning on launching kind of a more personal finance ecosystem with personal lending, auto lending, things like that next year. That concerns me. I don't like seeing companies venture outside of their core competence. I don't like seeing companies trying to get too big too fast, but that's neither here nor there. In 2020, Better originated $24 billion in mortgages. That gave it about a 0.5% share of the mortgage market and was about 400% year-over-year growth.

Now, as we mentioned, take that 400% growth figure with a big grain of salt, everybody was refinancing in 2020. All mortgage lenders look fantastic if you just look at 2020. Excuse me, going forward, all SPAC IPOs have pretty crazy projections. I'm sure you guys have noticed that.

Jon Quast: They project out to 2030 sometimes. 

Frankel: Right. It's always like a multiple of where they are now. Better projects $181 billion in lending volume in 2023. They were at $24 last year, so $24 to $181. Take that with a big grain of salt, and where I take issue with their projection is they are anticipating mortgage volumes doubling in 2021 from 2020 levels.

They did $24 billion in origination volume last year. They're projecting $57 this year. Now, unless rates continue to plunge dramatically, housing inventory is really rebounded historic norms and the stars align. I don't see them getting to that. Having said that, this is still a pretty impressive business. The mortgage process is very broken. There's a lot of little pieces to buying a house. They can really be consolidated and combined and made more efficient. Are either of you homeowners?

Quast: Yes. I just bought a home in the past year, I used Guaranteed Rate, but it's a frustrating process for most things.

Vena: Yeah. I'm a homeowner who just recently refinanced and I think the process certainly is broken. The amount of paperwork that you have to provide is just ridiculously high. 

Frankel: Right. Better aims to kind of consolidate that process. Not only do they close quicker, their average rate lock to funding of a loan happens at 37 days versus 51 for the industry average, so two weeks less than the industry average. If you look at this, I'm just going to share one slide on my screen for one second. Excuse me. Jon recently bought a home. I'm sure he is familiar with all these little teeny pieces that you're seeing listed around this little wheel.  If you have a condo, you didn't have to pay some of them. But even so, it's all these little bits and pieces that Better really wants to consolidate into one process.

That really is where the potential lies. There is $2 trillion of mortgage volume originated in the U.S. every year. If you include overseas mortgages and all these adjacent services, it's $15 trillion in consumer spending every year. $15 trillion. I don't know of any other market that big. But like I said, their projections are a little bit out of whack, which has given them a kind of a lofty valuation.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Aurora Acquisition Corp. Stock Quote
Aurora Acquisition Corp.
AURC
$10.02 (0.10%) $0.01

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