The past few months haven’t been kind to Better.com.
The online mortgage company has had to wrestle with challenges associated with rising mortgage rates, but it’s also had to do so amid a wave of bad press over a duo of botched layoffs.
With its last misstep still fresh in the minds of many in the mortgage and real estate industries, the tech company was dealt another blow by a recently leaked video of a town hall meeting that immediately followed the company’s infamous Zoom-Call layoffs.
“We should have done what we did today, three months ago,” said Better CEO, Vishal Garg, in the video circulating in media outlets like Fast Company and Tech Crunch on April 7.
During the town hall Zoom call, Garg offered a mix of reasons behind his decision to ax 900 people in December, including a shifting mortgage environment that has seen refinance originations—a large portion of Better’s business model—shrink dramatically from its elevated levels during 2020 and 2021.
Better was among several mortgage lending companies that benefited from the past two years of hyperactive home buying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production. It’s also among the list of companies that have been downsizing its staff after a glut of hiring to account for demand in the pandemic.
Garg indicated that Better’s labor cuts were made because of lagging production and underperforming employees—arguably another sign of the shrinking refi market. However, the tech company’s CEO also stated that the cuts weren’t just based on performance.
“Make no mistake about it; we did also eliminate redundant roles,” he said. “We also did eliminate folks who might be strong performers but were just in the wrong place at the wrong time and weren’t mission-critical to taking the rocket ship forward.
“Some of you might ask why if we’re firing 10% of the workforce we are continuing to hire on campus…it’s because we expect those people to be super productive and to add value, and if they don’t, we will exit them too,” Garg adds.
Garg also admitted that he made several mistakes within the past two years, including over-hiring and bringing in “the wrong people.”
“I was not disciplined over the past 18 months,” he said. “We made $250 million last year, and we probably pissed away $200 million. We probably could’ve made more money last year and been leaner, meaner and hungrier.
Throughout the video, Garg referred to his vision of a “leaner and meaner” company that would spend time “grinding the business forward” in what he characterized as a bloodbath in the mortgage industry.
When contacted for a response to the leaked video, a Better spokesperson sent the following statement:
“Following a thorough review of our culture by outside experts, we have taken significant steps related to our executive leadership structure, governance and workplace practices to ensure that Better’s culture and operations reflect our values and that we always maintain an environment of fairness, respect, transparency and care for every member of our team.”
The company has admitted that “company culture” issues have contributed to its performance and financial decline in previous documents filed with the U.S. Securities and Exchange Commission.
In one document, Better estimated on a preliminary basis that its 2021 Q4 revenue dropped between 17% to 22% sequentially versus the previous quarter. The company also forecasted an annual revenue decline of up to 29% compared to 2020.
It reported a net loss of $111.1 million for the nine months ending on September 30, 2021 and estimates an annual net loss between $167 million and $182 million based on a preliminary unaudited forecast in the filing.
While Better.com hasn’t been the only company in the lending industry to experience attrition, the New York-based start-up has arguably been the most publicized for how it handled its labor cuts.
A few months after the Zoom call incident, the company again made headlines for laying off 3,000 people—nearly 35% of its workforce—on March 8 after the online mortgage company accidentally sent severance pay-slips to a handful of employees too soon.
After dealing with a fair share of scrutiny over both events, the company recently announced a new approach to its continued “rightsizing” efforts.
Better.com announced to employees this month that it was starting a voluntary separation program that it has started offering to eligible employees in the U.S.
Better’s Chief People, Performance, and Culture Officer, Richard Benson-Armer, outlined the voluntary separation program in an email sent to employees obtained by RISMedia.
“As many of you know, the uncertain mortgage market conditions of the last couple of weeks have created an exceedingly challenging operating environment for many companies in our industry,” Benson-Armer wrote. “This is requiring many of them to make difficult decisions in order to sustain their businesses. Despite ongoing efforts to streamline our operations and ensure a strong path forward for the company, Better is no exception.”
Better is offering 60 working days’ worth of severance pay and health insurance coverage for those who leave the company. The program was made available to many of the company’s U.S.-based employees in Corporate and PDE who are Level 10 and below.
Employees under 40 years old were given up to seven days from receipt of the agreement to accept the offer, while those over 40 were given up to 21 days. Both would receive their final payment on the date of their given deadlines.
The memo also noted that employees who took the buy-out would lose access to Better’s system “shortly after signing the agreement.”
“While this voluntary separation exercise is difficult, we remain confident in the strong path ahead for Better,” Benson-Armer wrote.” Given the headwinds facing our industry, collaboration and innovation—the hallmarks on which Better built its success—will be more essential than ever.
Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas at jgrice@rismedia.com.
