"So, let's all acknowledge that market rates' in mortgage reflect 350 basis points of markup, which raises a customer's mortgage rate by roughly 0.875. A spokesperson for Opendoor did not immediately respond to HousingWire's request for comment. While industry experts say the 350-bps estimate can vary depending on the lender, loan type and market conditions, they argue the bigger question is whether a strategy like this can hold up over time."
"When a company comes in dramatically below market, it's usually a launch strategy, said one loan officer who asked to remain anonymous. Operational costs catch up, because they always do, so either margins creep back up or the model breaks."
"Some industry professionals view the offering as similar to the strategy many homebuilders use, providing below-market mortgage rates while potentially pricing homes at a higher premium. Others question whether a program like this could be financially sustainable if offered for an extended period and at scale."
Opendoor launched a mortgage product in Denver and Colorado Springs offering below-market interest rates by removing approximately 350 basis points of markup typically found in the mortgage industry. The company claims this reduction lowers borrower rates by roughly 0.875 percentage points. Industry professionals compare the strategy to homebuilder practices of offering discounted mortgage rates while potentially charging premium home prices. However, significant debate exists regarding who ultimately absorbs these costs and whether the model remains financially viable at scale over extended periods. Experts acknowledge the 350-basis-point estimate varies by lender, loan type, and market conditions, but emphasize that operational costs typically increase over time, potentially forcing margins to rise or causing the model to fail.
Read at www.housingwire.com
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