Quicken and NAR ask HUD to withdraw proposed amendments to Fair Housing Act

In recent days, both Quicken Loans, the nation’s largest lender, and The National Association of Realtors, the nations’ largest trade organization, have called on the Department of Housing and Urban Development to withdraw its proposed rule to amend the HUD interpretation of the Fair Housing Act’s disparate impact standard.

Bill Emerson, vice chairman of Quicken Loans, expressed his company’s concern about the impact of the proposed rule changes during the pandemic in a letter sent to HUD Deputy Secretary Brian Montgomery on Friday.

“We recognize that the proposed changes are intended to clarify the use of disparate impact in housing discrimination cases. We agree that unclear rules in the housing and mortgage markets can, and often do, constrain lending and investment in the space, harming those the rules are intended to help.

“However, legitimate concerns have been raised about how the proposed rule proposed would make it difficult to address some of the more challenging systemic issues of discrimination that the Fair Housing Act should be used to address,” the letter continues.

“We are living in a pivotal moment of American history, with much of the nation looking more deeply at the systemic effects of discrimination throughout our society and economy. In the spirit of that moment, policymakers and industry participants alike should look beyond the surface forms of discrimination to those that lie beneath, because the effects are often no less destructive,” the letter states.

“We believe that HUD should continue to focus on the deeper forms of discrimination, and has an opportunity to work together with lenders, consumer advocates, and civil rights experts to find a common ground proposal on disparate impact that is fair, clear, and remains a strong and effective tool for our nation in combatting all forms of housing discrimination.”

In its letter released on Monday, NAR said that HUD’s revisions place too heavy a burden on the ability of parties to bring legitimate initial disparate impact claims. NAR President Vince Malta went on to say there is broad consensus that “now is not the time to issue a regulation that could hinder further progress toward addressing ongoing systemic racism.”

Rather, he suggested this is a time to explore ways to work together “to eliminate unnecessary barriers to housing opportunity and advance policies that allow more Americans to fully participate in the American Dream.”

As such, NAR is “respectfully” asking that HUD withdraw its proposed rule to amend its interpretation of the Fair Housing Act’s disparate impact standard.

When asked about timing, NAR said this was a conversation the organization had been having internally, with its partner real estate associations and with Fair Housing Groups for over a month, following the wave of protests that came in response to George Floyd’s murder.

“We determined from those conversations that this was the appropriate time to call on HUD to withdraw its proposed role, and submitted the letter to the Department as soon as it was finalized,” NAR said.

Bryan Greene, NAR’s director of fair housing policy, said that a REALTOR’s livelihood depends on his or her ability to sell homes, so “it is in every REALTOR’s interests to eliminate barriers that unfairly deny housing opportunities to any segments of our population.”

“According to disparate impact doctrine, practices that disproportionately turn some groups away and can’t be justified as necessary on business grounds – or that could be served in a less discriminatory way – including lending practices, housing practices, and governmental policies, can be challenged by consumers,” he said.

“Most business practices in housing and lending are necessary to evaluate a consumer’s creditworthiness and ability to purchase, but it is also critical that we ensure none of these requirements unfairly target or deter certain groups from pursuing the American Dream of homeownership,” Greene added.

Last August, we reported that HUD had proposed making changes to the nation’s fair housing rules, a move that fair housing advocates claimed was part of a Trump administration effort to “gut” federal protections against housing discrimination.

At its most basic, the updated guidelines revised the current loose, three-step threshold for Fair Housing violations and imposed a specific, five-step approach that would require regulators to prove intentional discrimination on the lender’s behalf.

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Quicken Loans drops S-1 under the name Rocket Companies

Quicken Loans on Tuesday filed an S-1 with the U.S. Securities and Exchange Commission under the name Rocket Companies.

Last month, we reported that the largest online mortgage lender in the U.S. had confidentially filed for its prospectus for an IPO. 

Today, the Detroit-based company revealed that it will list its common stock on the New York Stock Exchange under the ticker symbol “RKT.” The company lists a figure of $100 million for the initial public offering, but the form notes that number is “estimated solely for the purpose of calculating the registration fee.”

Founded in 1985, Quicken Loans/Rocket Companies has been seeing record numbers of refinance and purchase applications in recent months in the midst of the COVID-19 pandemic.

The corporate structure for the newly public entity is sophisticated, and notably, Dan Gilbert will still retain significant control over the public company. Specifically, he will control approximately 79% of the combined voting power of Rocket Companies’ outstanding common stock.

This gives Gilbert control over actions requiring approval of stockholders, which would include corporate actions like election of the board of directors, amendments to bylaws and the approval of any merger or sale of the business.

Quicken said its financial results for the six months ended June 30, 2020, were not yet complete and would not be available until after the completion of this offering. 

But for 2019, the company revealed that its total revenue (net) was $5.1 billion and net income attributable to Rocket Companies was $893.8 million, representing a 22% and 46% growth from the prior year, respectively. Over the same time period, adjusted revenue was $5.9 billion, adjusted net income was $1.3 billion, and adjusted EBITDA was $1.9 billion. 

It also noted that as of June 30, 2020, it had approximately 98,000 clients on forbearance plans, which represents approximately 5.1% of its total serviced client loans.

The company said that it is the largest retail mortgage originator in the U.S. according to Inside Mortgage Finance, with $145 billion in originations in 2019. 

Specifically, the company originated $51.7 billion in the three months ended March 31, 2020, which is a 23% CAGR from originations of $25 billion in 2009.

It also claims to be “the scaled leader in the U.S. mortgage industry” with market share of 9.2%. Of total originations in 2019, $39 billion, or 27%, were to clients purchasing a home.

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Sundae raises $16.55 million for distressed real estate marketplace

Sundae, a residential real estate marketplace that pairs sellers of distressed property with potential buyers, has raised $16.55 million in Series A funding.

QED Investors led the round, which also included participation from PayPal co-founder Peter Thiel’s Founders Fund, Susa Ventures, as well as a group of unnamed real estate and fintech investors and entrepreneurs. The financing brings San Francisco-based Sundae’s total raised to just over $19.7 million since its August 2018 inception, according to the company.

Notably, Sundae’s co-founders have deep expertise in the real estate and mortgage industries. CEO Josh Stech was founding partner and senior vice president of sales at LendingHome, an online mortgage bank specializing in short-term residential bridge loans. President Andrew Swain was CFO at LendingHome, and prior to that, served as CFO at Airbnb

The pair teamed up to form San Francisco-based Sundae in August 2018, and launched the marketplace in January 2019.

I hopped on the phone with Stech last week, who told me that Sundae aims to help people who need to sell dated or “damaged” properties for a variety of reasons – such as job loss, illness or divorce. In many cases, he said, such vulnerable sellers get taken advantage of by “fix and flippers” seeking to capitalize on their misfortune. 

Since sellers in these situations don’t typically have the funds to fix up their properties before selling, Sundae lists the property for them on its platform. There, it is visible to about 1,000 qualified off-market buyers.

“Unlike on the mortgage side, there’s no regulation in this industry,” Stech told HousingWire. “So it’s become a bit of a black market that has not caught the attention of anybody to do anything about it so far until Sundae. We noticed there really is a discovery problem here. Someone needs to sell a home that needs a lot of work, and there was no intermediary to match them with someone capable of doing that work.”

Sundae essentially aims to aggregate demand from “fix and flippers,” who use the marketplace to bid against each other for distressed properties.

“Although our process drives a better price, price isn’t really what people are solving for,” Stech told HousingWire. “They mostly want a better process. They’re already under stress having to sell in the first place.”

How it works

Interested sellers can go to Sundae’s marketplace and request an offer. Someone from the company then reaches out to gather additional information and learn more about the sellers’ needs. After a “brief home visit” (or virtual walk-through if preferred by the seller in the COVID-19 era), Sundae makes an offer. If the seller accepts and an inspection is completed, the company offers a $10,000 cash advance before closing to help homeowners with moving costs or other expenses. It charges no closing costs or agent fees. 

Sundae offers up the property on its marketplace, giving investors a chance to bid on it. In some cases, an investor might even pay more than what Sundae originally offered.

“If an investor’s price is higher, we’ll go back and give more money to the homeowner,” the company says.

Sundae claims that homeowners can close in as little as 10 days or can take their time and move up to 60 days after accepting its offer. 

Since its launch 18 months ago, the startup says it has grown to become the second largest home buyer in the markets it serves across Southern California. Currently, it serves San Diego County, Riverside County, San Bernardino County, and Los Angeles County. So far, it has helped hundreds of sellers dispose of their properties. 

Sundae makes money by charging buyers in its investor marketplace a fee when it “assigns” them a property. 

The company plans to use its new capital in part to expand to new markets across the U.S. In particular, it wants to expand up the coast through central and northern California before moving east to markets such as Texas, Atlanta and Florida, according to Stech. It also wants to continue investing in building out the technology and naturally, do some hiring. Sundae currently has about 50 employees.

The coronavirus pandemic has been a tailwind for Sundae’s business, Stech said.

“Seller home urgency has increased and unfortunately at the same time, flippers are smelling more blood in the water,” he told HousingWire. “So we view ourselves as more important than ever.”

Frank Rotman, founding partner at QED Investors, believes the distressed residential real estate market is ripe for innovation, “especially now.”

“There is a huge unmet need for solutions that make the selling process more efficient and transparent,” he said in a written statement. “As a team of operators, we’re excited to work with the Sundae team to build out their footprint, support their rapid growth and deliver a sorely-needed customer-centric approach to the market.”

iBuyer or not?

Stech attempts to differentiate the startup from iBuyers, saying that Sundae focuses on buying distressed houses that need significant renovations in “as-is” condition. The average renovation budget for homes on its platform is about $65,000, according to Sundae.

“While iBuyers offer a convenience of selling without an agent, they typically won’t purchase properties that need a lot of love,” the company says. “In fact many of our customers come to us after being rejected by one of the iBuyers because their property requires too much work.”

Another difference is that most iBuyers provide an offer before seeing the house, which means the price almost always changes later on, Sundae claims. 

“But we won’t give an offer until our local market expert has walked through and seen the house,” he says. (Or in some cases in the COVID-19 era, until a video walk-through is completed).

Sundae essentially aims to make the process streamlined for the seller by serving as the main point of contact in selling their home, and for the buyer by doing all the due diligence on a property.

In addition to providing a marketplace to connect sellers of distressed property to the best buyer, Sundae also operates as a property investor and will purchase, renovate and resell properties through its resale brokerage, Sundae Homes. 

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Venture funding roundup: The week’s top deals

Hello, and welcome to our new weekly column dedicated to industry-related funding rounds. Every Friday, we’ll publish a fresh roundup of financings in the housing industry, including who raised, how much they raised, a description of what they do, as well as who’s backing them and why. We’ll also mention any big exits in the space.

So let’s get started.

We kicked off the week (my first with HousingWire) with an exclusive piece on RenoFi, a fintech platform that aims to empower lenders to offer a “next generation” of renovation loans, raising $6.4 million in Series A round of funding.

Canaan Partners led the financing, which also included participation from new investor Comcast Ventures and existing backer First Round Capital. The investment brings RenoFi’s total venture raised since its inception in 2018 to $7.15 million.

Justin Goldman, the company’s CEO and cofounder, emphasizes that RenoFi is not a lender. Instead, it partners with mortgage lenders such as credit unions, which offer “RenoFi Loans.” 

Then on June 23, credit card giant Mastercard revealed its plans to acquire Finicity, a provider of real-time financial data aggregation and insights, for $825 million.

In mortgage, Finicity provides digital verification of assets, income and employment and is part of the Fannie Mae Day 1 Certainty program and the Freddie Mac AIM program.

The news came just five months after rival Visa announced it was acquiring fintech unicorn Plaid for a staggering $5.3 billion. Both acquisitions are examples of credit card giants recognizing the value of acquiring tech companies rather than just trying to build out the technology themselves.

Also on June 23, real estate tech startup OJO Labs announced the close of a $62.5 million funding round and the acquisition of Movoto, a residential real estate search site.

With the latest financing, OJO Labs has now raised a known $134 million in venture funding since its 2015 inception, according to Crunchbase. Wafra led the latest investment, which also included participation from Breyer Capital, LiveOak Venture Partners, Royal Bank of Canada and Northwestern Mutual Future Ventures. The company declined to reveal at which valuation this latest round was raised.

Acquiring other startups is clearly a key part of Austin-based OJO Labs’ growth strategy. The company, which combines human and machine intelligence to provide personalized property recommendations and insights, also acquired real estate software platform RealSavvy last October. OJO Labs also picked up WolfNet Technologies in October 2018.

OJO Labs CEO and co-founder John Berkowitz told HousingWire that even prior to this acquisition, his company had doubled the size of the company over the last six months in terms of users and transactions conducted through its system.

“COVID has been a real tailwind,” he said. “We anticipate several multiples of revenue growth over the next 18 months.”

On June 24, Wells Fargo led a $41.5 million investment round for Mynd Property Management, the four-year-old startup led by Doug Brien and Colin Wiel, who previously founded Waypoint Homes.

The Series C funding round happened despite the worst pandemic in over a century plunging the nation into a recession.

“It’s a strong validation of our technology, business, and virtual operations that during one of the most challenging economic cycles in American history we were able to secure $41.5 million in funding,” said Brien, Mynd’s CEO and a former NFL placekicker for teams including the San Francisco 49ers.

Other investors in Mynd’s Series C round of financing included the company’s existing Silicon Valley backers: Canaan Partners (who led RenoFi’s round), Lightspeed Venture Partners and Jackson Square Ventures

Also on June 24, OMERS Ventures led a $10.5 million Series A extension funding round for residential real estate company Landed, bringing the startup’s total venture raised to just over $22 million. Existing backer initialized Capital also participated in the investment. 

Landed offers a shared equity down payment program for essential employees – starting with educators – who wish to buy homes in the communities where they work across the United States. Landed’s down payment program invests alongside employees in education to help them reach a 20% down payment. Landed’s funds, up to $120,000 per household, come in the form of an equity investment, meaning that home-buyers share in a portion of the gain – or loss, if any – of the value of the home once it’s sold or refinanced.

The venture capital dollars are in addition to the over $50 million in private equity real estate capital Landed has raised for its down payment program. 

New York-based Doorkee, which describes itself as an all-in-one digital platform offering landlords and tenants a modern solution to the “antiquated” rental process, announced on June 24 it had raised $5.7 million in early-stage funding. New York City landlord Simon Baron Development and early-stage venture capital firms Corigin Ventures and Alpha Edison, which have both previously invested in proptech startups. Investors in the round also included landlords Stonehenge NYC and Bushburg Properties.

Cofounders John Fagan, CEO, and Jordan Franklin, COO, created Doorkee in 2019 to streamline and optimize the rental process by creating a peer-to-peer market that aims to solve for inefficiencies and common problems experienced by landlords, departing tenants and apartment seekers. By bringing the entire process online, Doorkee creates a flywheel effect that it says benefits all parties.

And last but certainly not least, high-flying hotel and short-term apartment rental platform Sonder this week raised $170 million in a Series E round that valued the company at $1.3 billion. 

Fidelity, Westcap, and Inovia Capital were joined by Greenoaks, Spark Capital, Greylock, Valor Equity, Tao Capital, Atreides Capital, and Lennar.

Founded in 2012 as a way to rent vacant college apartments, Sonder’s portfolio has grown to a massive size, according to Forbes. Today its 1,000 employees manage more than 12,000 rooms across 28 cities and six countries. Sonder signs three to five year leases, often partnering with landlords to occupy full floors, Forbes’ Steven Bertoni wrote earlier this week.

The funding comes just over three months after Sonder laid off or furloughed more than 400 people, or more than one-third of its staff. The company in July 2019 had raised $210 million in a Series D that valued the company at more than $1 billion.

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