Mortgage startup Tomo offering 120-day rate locks

Fintech also launches a new product dubbed "Lock & Shop," which does not require a property address to guarantee a mortgage rate

Fintech startup Tomo will allow borrowers to lock in a mortgage rate for up to 120 days, about twice as long as most lenders.  

The lock-in period complements a new product dubbed “Lock & Shop,” which does not require a property address to guarantee a mortgage rate, according to the company.  

Homebuyers have struggled in a volatile housing market throughout the pandemic and rising mortgage rates will make things even more difficult,” Greg Schwartz, CEO and co-founder, said in a statement this week. 

Since January, mortgage rates have risen quickly due to high inflation and the Federal Reserve’s plan to tighten monetary policy. That has put pressure on mortgage lenders with extended lock-in periods. 

When rates are surging, lenders’ capital markets teams have trouble selling loans that were locked at a lower rate because investors demand higher returns. That often forces lenders to sell at par or take a loss.

Tomo, offers jumbo loans in Washington, Texas, Colorado, Florida and Connecticut says it can provide lock-in periods up to 120 days because it is originating the mortgage, not depending on these investors. 

Founded in 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, the fintech focuses on the $1.6 trillion purchase mortgage sector. Last summer, the company launched the platform after raising $70 million in seed capital and achieving ‘unicorn’ status.   

In 2022, the fintech announced raising $40 million in a Series A round led by SVB Capital, which more than doubles the company’s valuation to $640 million.  

Tomo, however, is not immune to the volatility in the markets. The digital mortgage lender laid off nearly one-third of its workforce in late May. “The recent shift in the mortgage and venture capital markets due to the rapid increase in interest rates has impacted Tomo’s business plans, and led us to make changes to our near-term strategy,” Schwartz said in a statement at the time.

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