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Fintech

The great fintech acceleration

Introducing the 2021 Mortgage and Real Estate Tech100 winners

The Great Acceleration HW+

We all have our own prominent COVID-19 memory from 2020. Mine was on Sunday, March 15. I sat at home that morning typing out an employee memo that effective immediately all team members would be expected to work from home and that the office would be closed to outside visitors until further notice. At the time, I thought this was a two-week precaution. We’d probably see everyone back in the office by April 1. Well, we all know how that one played out. 

Fortunately for the team at HW Media, we’re a digital-first organization. All work is done in the cloud. Everyone is on laptops. Very little work must be done in office. Our team didn’t flinch and has been running full-steam for a year. With readers and clients distributed coast to coast, we’ve always relied on digital means to communicate. But that doesn’t mean we haven’t had our challenges. We had to find new ways to collaborate, build comradery, help each other stay sane, and onboard new team members. I can’t say we’ve perfected the last one yet. I’ve yet to meet 15% of our team members in-person, and I don’t know when I will. That drives me crazy. 

But with these challenges came progress. We accelerated decisions that were further out on the roadmap. We hired team members we likely would not have hired because of geographic location. We launched new products. We developed new skills. We adopted and built new technologies and solutions. We even launched a new brand called FinLedger which is entirely dedicated to fintech and financial services innovation. 

And the housing industry did the exact same thing. Mortgage lenders developed new processes. They quickly implemented new technologies and trained team members. Real estate agents masked-up and reinvented open houses. Title agents mastered drive-by closings and reluctantly adopted online notary solutions. Appraisers implemented socially distanced and COVID-friendly inspection processes. Processors and underwriters figured out how to manage record-shattering origination volume while also juggling Zoom-school and other life pressures. 

And the work didn’t stop there. Mortgage and real estate executives hired like mad. They pushed forward M&A deals. Implemented enterprise fintech solutions to meet market demands. Technology executives raised massive amounts of capital. They acquired competitors and partners to gain scale and extend capabilities. And they did all of this while operating with the cloud of uncertainty brought on by a pandemic, recessionary fears and a presidential election. 

As we observe, digest and analyze all of this activity, we can’t help but surmise that all progress in 2020 was influenced or enabled in some way by technology. 

For better or worse, this tech-enabled progress may force all lenders, real estate brokerages and fintech companies to choose between two very distinct paths – massive scale or niche focus. The players that refuse to choose will get killed in the middle. Let’s explore how this trend is beginning to play out. 

Technology mergers & acquisitions

M&A took a brief hiatus in Q2’20 as the industry digested uncertainty and M&A bankers struggled to get their VPNs to work from their country houses. But the second the housing industry demonstrated resilience through insane purchase demand and life-saving refi volume, the dealmakers were off to the races. 

CoStar kicked off the acquisition races in May with the purchase of Ten-X Commercial with the goal of moving commercial real estate deals online. 

Then Black Knight swooped in to acquire Optimal Blue from Chicago-based private equity firm GTCR in July. The $1.8 billion acquisition was certainly motivated by Optimal Blue’s cloud-based capabilities, which help over 1,000 mortgage lenders by facilitating secondary market interactions. This is a mission-critical step in any digital mortgage process, and clearly a building block toward Black Knight’s end-to-end ambitions. 

And just over a week later — when most of the country was still trying to figure out if their kids would be going back to school in August — the big kahuna of 2020 mortgage fintech M&A deals was announced. NYSE-owner Intercontinental Exchange announced that they would be acquiring Ellie Mae from Thoma Bravo for $11 billion – a staggering 3x what Thoma Bravo acquired the company for 15 months prior. This deal isn’t just notable because of the size, but also the strategy. Prior to the Ellie deal, ICE acquired Simplifile and MERS. Adding Ellie Mae to the mix positions ICE Mortgage Technology to “…realize the true digital mortgage,” said Jonathan Corr, president and CEO of Ellie Mae. Corr retired a month later, and Joe Tyrrell stepped up as president of ICE Mortgage Technology. 

Not happy staying on the sideline long, Black Knight was right back at the deal table in August with the acquisition of electronic signature company DocVerify. DocVerify, like other remote online notarization players, was a huge beneficiary of a 2020 tailwind. The pandemic massively accelerated efforts in the mortgage industry to adopt RON, in the pursuit of creating a lending process that is completely digital and COVID-safe for all parties. 

At this point, private and public market investors began to see mortgage and real estate as a bright spot in the economy. And the deals only accelerated from there. 

RE/MAX acquired a location intelligence data company called Gadberry Group. Stewart Title acquired RON pioneer NotaryCam. Private equity firm Thoma Bravo acquired RealPage for $10.2 billion. Qualia officially achieved unicorn status in their series D and immediately used some of the proceeds to acquire Adeptive Software. First American announced its planned acquisition of subservicer ServiceMac. SitusAMC entered the wholesale tech channel by acquiring ReadyPrice. A360inc acquired Express Notary Services in the race to RON. This is just a sampling. 

Then, if the start of 2021 is any indication for the rest of the year, after months of uncertainty, CoreLogic announced in February that it entered into a definitive agreement to be acquired by Stone Point Capital and Insight Partners for $80 per share in cash, or an equity value of about $6 billion. The company had been fighting a public battle since last July with activist investors pushing for change and value creation.

Fintech adoption and growth

Dealmaking wasn’t the only avenue housing fintech players pursued to achieve scale in 2020 – good old-fashioned organic growth was quite in vogue. It’s amazing what a pandemic-induced Great Acceleration can do for technology adoption and revenue growth. 

Cloudvirga co-founder Kyle Kamrooz shared that, “2020 was a year of phenomenal growth for Cloudvirga and our clients. Our retail digital point of sale (POS) platform enabled our clients to work remotely and, at the same time, set new records.” This growth equated to revenue doubling in 2020 – and the company expects similar growth in 2021.

StreamLoan, a digital mortgage loan software company, reported similar results. The company shared, “StreamLoan grew more than 600% in 2020, year-over-year, attributed to the recognized value StreamLoan delivers to the market, accelerated digital adoption driven by the pandemic…”

MAXEX, a digital exchange for buying and selling residential loans, experienced a record year in 2020 despite the severe shortfall in liquidity in the non-agency market that resulted from COVID-19. The company achieved more lock volume in the first 11 months of 2020 than it did in the prior three years. The fintech company shared that “MAXEX has now reached $13 billion in non-agency lock volume and its marketplace has grown to 19 institutional investors and more than 150 bank and non-bank lenders.” 

RON leader Notarize gave all business operators reason for envy in 2020. Notarize as a business saw 600% growth in 2020. In the category of real estate, the company saw volume from title and lender clients increase 825% from 2019 to 2020. Notarize processed $100B in real estate closings in 2020.

These are just a handful of anecdotal examples of incredible outsized, organic growth achievements clearly influenced by the Great Acceleration of fintech. The following two lists showcase the 2021 Mortgage and Real Estate Tech100 winners – all examples of outsized growth driven by innovation and impact.

To read the full March issue of HousingWire Magazine, click here. 

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