In 2016, there was more than $2.1 trillion dollars in mortgages issued in the U.S. alone. Despite the staggering size of the mortgage market, it still runs on decade old technology and processes. As anyone who has ever applied for a mortgage can tell you, applications are completed using pen and paper, a patchwork of legacy software point solutions and involve 1,000 page long loan files. Mortgage lenders spend more than $8,000 in processing costs on each origination. Cost aside, the process results in significant redundant manual work and is highly error prone.
The inadequacy of the software stack powering mortgages was most apparent during the 2008 financial crisis — where the lack of comprehensive origination data concealed the risk in the system. It was during the throes of this crisis that Nima Ghamsari and Eugene Marinelli first came face to face with the hairy mortgage problem. At the time, they were working very closely with the big banks at Palantir, where they built the Palantir for financial services organization. In 2012, seeing the opportunity to transform the consumer lending industry with software and data, they left Palantir and partnered with Erin Collard to found Blend.
Several months ago, my colleague and Greylock investor Saam Motamedi first met with the Blend team. As we got to know Nima and the team over the course of many meetings, we got more and more excited about their ambitious vision for reinventing mortgages and building the next generation financial cloud. Today, we’re thrilled to announce that Greylock is leading the $100M Series D financing in Blend and I have joined the Board of Directors.
Reinventing Home Mortgage
Buying a home is the largest — and often times, most painful — purchase most people make in their lives. Blend helps reduce the pain by delivering a streamlined, borrower-friendly digital mortgage experience that borrowers can complete online in minutes. Blend integrates deeply into a bank’s technology stack and digitizes the mortgage by automatically collecting and verifying borrower data, using proprietary algorithms to process credit score and risk, dynamically delivering e-disclosures, and enabling loan officers to communicate with the borrower directly in the application. The result is a transparent mortgage process that closes in days instead of weeks, with some of the highest NPS scores we’ve ever seen for a financial services product.
The Market Leader in Mortgage
As we dug into the mortgage market, we spent time talking to the large lenders, regulators and GSEs like Fannie Mae and Freddie Mac. Blend kept coming up in discussions with all three stakeholders as the leader in transforming the mortgage process. Blend has cemented its position by partnering with many of the country’s largest lenders, including Wells Fargo, US Bank and Movement Mortgage. In fact, Blend is already working with lenders who control 25% of the U.S. mortgage market, and these lenders have used Blend to service thousands of customers and accept tens of billions of dollars in mortgage applications in the first half of 2017 alone.
The Industry Cloud for Financial Services
Mortgages are just the first chapter of Blend’s vision. Blend is building for all of consumer lending with a rich ecosystem that includes all steps in the process — integrating with insurance companies, appraisers, and underwriting tools to let borrowers and loan officers complete the origination process entirely in Blend. The team is also working closely with the GSEs who buy mortgages from originators to automatically verify borrower data at the source. This will help move the industry towards real-time mortgage underwriting, while eliminating billions of dollars of cost incurred by the different transaction participants in collecting and normalizing data — providing comprehensive transparency about every single origination, which may go a long way in helping prevent the next financial crisis.
Over the next few years, as they fulfill their ambition for powering all of consumer lending, Blend will leverage the platform they’ve built for mortgages to roll out seamless digital origination solutions for home equity lines, credit card lines, student loans and others — enabling lenders to deliver a consistent, omnichannel experience to their customers across their entire credit portfolio.
Blend is growing quickly, having doubled their customers and headcount so far this year, and will use this financing round in part to open new offices in both San Francisco and New York. We look forward to partnering with Nima and the entire Blend team to deliver modern lending experiences and build the next-generation financial cloud.