Companies with deep pockets, including Zillow, are aggressively increasing their MLO headcount to capture future market share, writes Mike DelPrete.
This article was shared here with permission from Mike Delprete of Inman Intel, Inman’s data and research division, providing deep insight and market intelligence into the business of residential real estate and proptech. Subscribe now.
Even in the downturn, people are still taking out loans and buying homes, and some companies are trying to grab a bigger share of the mortgage market.
Why it matters: Tracking the number of MLO (mortgage loan originator) employees is a natural consequence of the size of a company’s mortgage business, and tracking employee numbers over time can help determine who is positioned for future growth. It will be clear what you are investing in.
Three interesting examples are Zillow, Redfin, and Better Mortgage. Over the past 15 months, Zillow has seen slow and steady growth in employee headcount, Redfin has seen a similarly gradual decline, and Better (a typical hockey stick curve) has seen rapid growth.
Broadening the scope of companies and looking at the past three years provides useful context in terms of growth, decline, and relative size.
Small disruptors pale in comparison to portals and established mortgage companies. Better go for a wild ride.
Percentage-wise, Better has grown the most over the past year.
Tomo is notable as the only disruptor to significantly increase MLO’s personnel numbers (but from a small base).
Mortgage origination amounts typically closely match the MLO’s headcount.
Origination growth continues to be steady as Zillow continues to invest and grow its mortgage business. Redfin and Better seem to be riding a more seasonal wave. (Note: Better’s origination value also includes growing refinance business, while Zillow and Redfin’s are primarily purchase amounts.)
The closest metric to measuring overall efficiency is starting volume per MLO.
Zillow was flat, while Redfin recently increased over the past two quarters. This is the result of a seasonal increase in volumes and a corresponding decrease in MLO headcount. The Better metric has improved significantly, but is on the decline. This is likely the result of a rapid increase in the number of employees (i.e., investment in future growth) that exceeds the number of new hires.
Revenue per MLO is another efficiency metric, and Zillow wins in that category.
Zillow’s mortgage revenue per MLO in Q3 2024 was $130,000, compared to $114,000 for Redfin and $89,000 for Better.
Bottom line: Companies that can afford to do so are aggressively increasing their MLO headcount to capture future market share.
The mortgage businesses of disruptors, primarily power-buying companies, remain much smaller as they weather the weak market and pivot their business models. The portal has been notable, acquiring large mortgage businesses, and Zillow continues to grow its MLO headcount. Pure mortgage companies, especially Rocket, are large and well-positioned to take advantage of growth opportunities in their own adjacencies.
Mike DelPrete is a strategic advisor and global expert in real estate technology, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.
