Why startups can’t disrupt the mortgage industry

Note from the future (Sept 2020): This post was originally published in TechCrunch on April 21, 2016. It was pretty polarizing and led to quite a few job interviews (mission accomplished!) Ironically two months after publishing, I joined some of the smartest people I’ve ever met to build a direct to consumer mortgage lender from the ground up at Clara Lending. Building from scratch was just as difficult as I imagined and ~18 months later we were acquired by SoFi.

Better Mortgage, on the other hand, pursued the strategy I described in this article. They bought Avex Funding around this time and built their technology on top of an existing mortgage lender. In August of 2019 they raised a $160m Series C from excellent VCs (Kleiner Perkins), Wall Street (Goldman Sachs) and key big bank partners (Citigroup & Ally financial). On the back of the coronavirus pandemic in 2020, interest rates have dropped to an all time low, and mortgage lending has accelerated to all time highs. I wouldn’t be surprised if they’re approaching unicorn status.

Also mentioned in this article, Sindeo attempted a pivot to a broker model before they laid off their staff and shut down. Lenda was acquired by Reali, the Lenda CEO’s new real estate brokerage start up, to become a captive in-house lender. SoFi (my future employer) is still in the mortgage business.

I wouldn’t change a thing if I could do it over again. However, this is a weird lesson in trusting your instincts.


Home loans are the Holy Grail of online lending. They come with high loan balances, steady returns and hefty fees. There also is a healthy liquid market for the securitized loans, and the debt is asset backed, which reduces risk and opens up the investor pool. On top of that, “establishment” mortgage lenders are not leading the pack with innovation, which means there is a lot of room for improvement.

So why can’t startups disrupt the mortgage industry?

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How SoFi can ruin fintech for everyone

Note from the future (Sept 2020): This post was originally published in TechCrunch on April 1, 2016 and caused quite a ruckus. Shortly after publishing, I joined some of the smartest people I’ve ever met to build a direct to consumer mortgage lender from the ground up at Clara Lending.

In an ironic twist of fate, ~18 months later we were acquired by SoFi. During the two and a half years I spent at SoFi this article was the gift that kept on giving. It caused headaches while negotiating my employment agreement, inspired some exciting conversations with regulators, and became the number one source of questions during recruiting conversation. And now I own a bunch of SoFi stock, go figure.


I’m going to start by saying I’m actually a huge fan of SoFi. I think they have a great product, they’ve built an incredible business and their growth in a regulated and complex industry is impressive.

And I say this even though I’ve had my student loan refinance denied by them — they still provide a great experience.

However, some recent strategic choices at the company give me cause to worry.

There are three things that, individually, seem innocent enough. But when considered together, I think SoFi  is at a tipping point, and, if managed incorrectly, it could create a chain reaction that will seriously hurt the company and the fintech market at large.

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