Opendoor Wants To Be The E*TRADE Of Mortgages: Lending Head Shares Its Edge Amid Steady Stock Rebound

• Opendoor announced the 4.99% mortgage product earlier this month; it’s currently in the pilot phase.
• The company clarified that its model eliminates intermediaries and legacy systems that typically shore up interest rates.
• Opendoor shares have gained in recent weeks, with Stocktwits sentiment shifting to ‘bullish’ from ‘neutral’ on Thursday.

Opendoor Technologies’ 4.99% mortgage rate for home purchases, a full percentage point below the national average, has turned many heads and prompted skepticism. Some even worried that Opendoor is likely losing money on the promotion. Now, the company has issued a clarification. 

In a blog post on Wednesday, Opendoor said it can offer loans at lower rates because its business model eliminates intermediaries and legacy systems that typically that typically shore up interest rates.

OPEN Changing Mortgage Economics?

“When you remove loan officer commissions, legacy systems, and the overhead traditional lenders pass to borrowers, the rate goes down. Our software handles the complexity, from the math to the documents to the underwriting that usually requires multiple people,” Dan Green, the head of Opendoor’s mortgage business, wrote in the company’s blog.

“We're not discounting our way out of traditional mortgage pricing,” said Green, who is the founder of Homebuyer.com, a real estate lending business Opendoor acquired in December. 

Opendoor argued that mortgages are among the last major services yet to be fully handled by software. Citing changes brought on by E*TRADE, which helped reduce brokerage commissions to zero, and TurboTax, which considerably eased the tax filing process, Opendoor believes it is bringing a similar change to the economics of mortgages.

CEO Kaz Nejatian announced the 4.99% mortgage product last Tuesday, which is currently available to Opendoor customers in Denver and Colorado Springs. At the time, a notable investor in the company, Eric Jackson, said, “lowering the rate isn’t just a pricing tactic, it changes who qualifies to buy a home.”

Fresh Sign Of Life In OPEN Stock?

Although Opendoor has lost its crown as the chief meme stock in the market – share price increased by as much as 20 times last year before tapering in the final months – the stock is showing signs of fresh life.

OPEN shares have gained about 13% since the last earnings report on Feb. 19. On Thursday, Stocktwits sentiment for the stock shifted to ‘bullish’ from ‘neutral,’ but with ‘low’ message volume.

“OPEN Dan Green drops the mic on 4.99% mortgage rate,” remarked a user, while another showed an optimistic position on the company’s many tech-related projects.

Year-to-date, OPEN shares are down 9.6%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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