Redfin announced Tuesday layoffs of 121 employees as it shakes up its mortgage department, including purchasing a lending company.
The real estate company entered into an agreement to acquire mortgage lender Bay Equity Home Loans for $135 million, two-thirds in cash and one-third in stocks, Redfin said in a press release and public filing.
The acquisition is intended to enable Seattle-based Redfin to expand its loans products nationally, as it wants to be a one-stop-shop for brokerage and lending. The company will offer mortgages to a larger share of Redfin’s home-buying customers right away, “including jumbo loans and loans for veterans and folks with lower credit scores,” said Adam Wiener, Redfin’s president of real estate operations.
Also, Redfin hopes it will let the company reduce investments in lending software by using the Bay Equity system.
But Redfin is first eliminating 121 mortgage roles, less than 2% of the total staff, mainly in sales support, capital markets, and operations. Redfin said the affected employees have been notified of the layoffs, and that they have the opportunity to find another role at the company, especially in real estate support, title, and iBuying organizations.
“Reorganizing our mortgage operations unfortunately means some colleagues and friends will be leaving Redfin,” Wiener said in a statement. “Many of these people are the pioneers who helped build Redfin Mortgage from scratch and we owe them a debt of gratitude.”
The move comes amid a bloodletting across mortgage with Wyndham Capital, Better.com and Interfirst Mortgage among the companies to announce significant layoffs as the music has stopped for high-volume refinancing.
The workforce reduction is expected to bring $6 million to $7 million in costs and transaction advisory fees of approximately $3.5 million. In addition, Redfin expects to incur a non-cash impairment charge of $2 million to $3 million on mortgage-specific, internally developed software.
Founded in 2007, Corte Madera-based Bay Equity originated a volume at $8.5 billion in 2021, nearly ten times the size of Redfin’s existing portfolio.
Due to its size, Bay Equity is more efficient at originating mortgages and selling loans in the secondary market to investors, according to Redfin, which said that the acquired company had generated positive net income over the last three years.
“For years, Redfin has talked about becoming a one-stop shop for brokerage, mortgage, iBuying and title services. Just having one company offer all services is more efficient, letting us keep customers’ lending fees low,” Redfin’s CEO Glenn Kelman said in a statement.
Bay Equity is licensed as a mortgage lender in 42 states. The company has around 1,200 employees, and there are no plans to reduce staff.
After the acquisition closes, which is expected to happen in the second quarter of 2022, Redfin’s mortgage operations will be consolidated under Bay Equity, and Redfin’s loan officers will move to the acquired company.
The management team will continue to operate under the Bay Equity name. Bay Equity CEO Brett McGovern stated the company will benefit from the customers generated by Redfin’s more than $25 billion in annual real estate sales volume.