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AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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The last domino: Zillow is getting into the mortgage business

First homebuying, now lending

The dramatic reshaping of Zillow’s place in the real estate ecosystem is about to take a giant step forward, as the online real estate behemoth announced Monday that it is getting into the mortgage business.

Nearly 18 months ago, Zillow shook up the real estate industry when it announced that it was getting into the home selling business by launching “Zillow Instant Offers.” In that program, prospective home sellers in certain markets can receive offers for their home direct from investors, all through Zillow’s platform.

But that was just an opening salvo to Zillow’s next move, expanding beyond simply facilitating the sale to an investor and becoming an investor itself. Through Zillow Offers, Zillow is now directly buying houses from sellers in Denver, Atlanta, Las Vegas and, Phoenix.

Zillow then makes the “necessary repairs and updates” and lists the home “as quickly as possible.”

But now, Zillow is preparing to expand even further into the real estate transaction and begin offering mortgages as well.

To power the expansion into mortgages, Zillow is buying Mortgage Lenders of America, a national mortgage lender located in Overland Park, Kansas.

According to Zillow, the acquisition of Mortgage Lenders of America will allow the company to “streamline and shorten the home-buying process for consumers who purchase homes through Zillow Offers.”

Zillow said that Mortgage Lenders of America will continue with its current line of business, offering mortgages directly to consumers, in addition to powering Zillow’s direct originations business within the Zillow Offers program.

Zillow also announced Monday that it will no longer allow other companies to participate in the Offers program. "Going forward, we will be the only buyer participating in the Zillow Offers program," the company said Monday in a letter to investors. "We no longer facilitate third-party investors to make offers to home sellers through a marketplace. This will ensure the process is as efficient and seamless as possible for sellers, agents and brokers."

Seemingly acting to assure potentially concerned lenders about being cut out of the process, Zillow cautions that its current advertising products for lenders “remain an important part of the business,” adding that the company “intends to support and grow that marketplace for years to come.”

In its release, Zillow also paints a picture of how small Mortgage Lenders of America’s market share is when compared to the number of mortgages that are apparently coming through the company’s mortgage portal.

“In 2017, consumers submitted 23 million loan information requests through Zillow Group's consumer brands,” the company said in a release. “Zillow’s lender advertising partners are vital to fulfilling the needs of those consumers going forward. Mortgage Lenders of America is an existing advertising client and, in 2017, originated 4,400 mortgage loans – leaving plenty of opportunity for independent lenders to continue to advertise and build their businesses on the Zillow Group platform.”

Mortgage Lenders of America was founded in 2000 and currently has approximately 300 employees.

According to Zillow, the company believes that owning a mortgage lender will allow the company to develop new tools and partnership opportunities, including for real estate brokers with existing in-house mortgage operations or mortgage affiliates.

“Getting a mortgage can be the toughest, most painstaking and time-consuming part of the home-buying process,” said Greg Schwartz, president of media and marketplaces at Zillow Group.

“Now that we are buying and selling homes through Zillow Offers, we believe that having our own mortgage origination service as an option for consumers will allow us to streamline the process for people who buy a Zillow-owned home,” Schwartz continued.

“Over time, we expect the work we do in conjunction with this new line of business will help us expand our offerings to our partners – including real estate brokers with existing in-house mortgage operations and third-party lenders who co-market with Premier Agents,” Schwartz added.

Zillow CEO Spencer Rascoff telegraphed this move a bit back in April in a call with investors. Responding a question about potential expansion beyond its direct homebuying business, Rascoff noted how other companies in the direct homebuying space (Redfin, for example) are able to provide “transactional lubrication” by offering mortgages directly.

And soon, Zillow will be able to offer mortgages on the houses it owns.

According to the company, the acquisition of Mortgage Lenders of America is expected to close in the fourth quarter, subject to approval from various regulators.

Philip Kneibert currently leads Mortgage Lenders of America, and after the transaction closes, Kneibert will continue to lead the company as its general manager and will report directly to Schwartz.

Mortgage Lenders of America will continue to operate from its headquarters in Kansas.

Financial terms of the deal were not disclosed.

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