Publicly traded mortgage tech company Blend Labs laid off 10% of its workforce amid major headwinds in the mortgage industry.
In a filing with the Securities and Exchange Commission on Tuesday morning, the Nima Ghamsari-led fintech said its “workforce reduction plan” would eliminate approximately 200 positions across the company.
The company, whose white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank, expects to incur about $6.7 million in costs associated with the layoff. Blend says the move will lead to approximately $35.4 million in annualized savings. The layoffs are to be completed in the second quarter, the company said.
In its Q4 earnings report earlier this month, Blend executives told investors and analysts that it was committed to reducing costs at its Title365 arm in light of lower origination volume from its mortgage originator clients. Blend anticipates that the mortgage industry it services will experience a 35% decline in origination volume in 2022, lowering its financial outlook.
“With rapid changes in U.S. interest rates, rising inflation and associated reductions in 2022 loan industry forecasts that commenced in the fourth quarter of last year and has continued into this year, loan originators are now dealing with razor-thin margins and trying to adapt to a new normal,” Ghamsari said on the fourth quarter earnings call. “It is clear that this rapid reversal in industry loan volume expectations has impacted our outlook for 2022 revenue growth.”
Blend wrote in its Q4 earnings presentation that rising mortgage rates have forced executives to pull back “very hard” on hiring and hinted layoffs in title insurance.
With refinance volumes anticipated to decrease by 62% this year and many originators experiencing layoffs, lenders are looking for a way to diversify their offerings with non-QM products and gain new business in order to maintain profits.
Presented by: Acra Lending
Overall, the company, which has never been profitable, lost $169.1 million in 2021, including $71.5 million in the fourth quarter. Blend’s net loss more than doubled from $74.6 million in 2020 during the refi boom and with the market headed into a correction, executives warned investors’ revenue would plummet. The company expects revenue to decline 31% to between $230 million and $250 million in 2022 from $363 million last year.
The upside for Blend, according to Ghamsari, is that the company expects to increase its market share during hard times. Blend grew its estimated mortgage market share last year from 10% to 15%, according to Ghamsari, and thanks to major deals with new clients like Mr. Cooper, he expects market share to increase to about 20% in 2022.
As of 11:50 a.m. EST, Blend’s stock was trading 6.46% higher than Monday, at $5.02 a share, with a market capitalization of about $1.17 billion. When Blend made its debut on the New York Stock Exchange in July, its market cap was about $4.6 billion.