Better.com, a company that leverages machine learning and AI to digitize and automate every step of the home financing process to make homeownership more affordable and accessible, today announced it has expanded into several new markets, including Montana, New Mexico, Rhode Island, Nebraska and Wyoming. The expansion follows a $85M Series C capital raise and a record-breaking year in which the digital mortgage disruptor reported 3x year-over-year growth, bringing the total number of funded loans since inception to $3B.

“Buying a home is not only the biggest financial transaction most people take, but also one of the most cumbersome, stressful and antiquated. Mountains of paper being faxed all across the country containing sensitive consumer data is a thing of the past and we strive to make every point for the borrowers home-buying journey seamless, digital and convenient,” said Vishal Garg, CEO and Founder of Better.com. “With our market expansion into several key states, we’re pleased we can now offer borrowers in 36 states home loans that are cheaper, quicker and commission-free.”

Thanks to Better.com’s commission-free model, each customer saves an average of $3,500 in fees.

The news of the expansion follows a strategic partnership announcement where Better.com will offer customers of Ally Financial (ALLY) a streamlined mortgage experience, including pre-approval for a home loan in minutes through its website. At $194 million in revenues the mortgage division is a small but growing business at Ally, which has $180 billion in assets.

The new partnership speaks to Better.com’s cutting-edge innovation: Better.com not only closes loans 25% faster than the industry average¹ (33.6 days vs. the industry average of 42 days), its proprietary technology also allows its non-commissioned loan officers to outpace the industry by 1084%, originating 45 loans per month vs. the industry standard² of 3.8 loans per month.

With the new expansion Better.com is now live in 36 states, representing approximately 80% of the United States mortgage volume.

In the last year, the fintech startup tripled the company headcount to over 600 people, opened new offices in Oakland and Irvine and moved headquarters to the World Trade Center in downtown Manhattan.

Earlier this year, Better.com closed on $85M in Series C funding, led by Ally Financial, Goldman Sachs, American Express Ventures, Citigroup, Kleiner Perkins, Pine Brook and the Healthcare of Ontario Pension Plan (HOOPP). The funding was allocated towards driving continued growth, filling key management positions and increasing investment in the company's innovative technology platform.

¹ Ellie Mae Origination Insight Report - March 2019

² MBA Economic and Mortgage Finance Outlook Prepared for Midwinter Conference - March 2019

According to new data presented by American Enterprise Institute (AEI), the quest for affordable housing still has a way to go. For one, the standards of accommodation and equipment are above what lower income groups are accustomed to and are also above the means of these groups. Secondly, the idea of achieving meaningful cost reduction through prefabrication and industrial reorganization doesn’t seem likely.

AEI went on to detail the relationship between house appreciation and new supply. Based on their analysis, a 10 percentage point increase in the newly constructed homes sale as a percentage all homes within a given price tier results in a .7 percentage point decrease in the rate of home price appreciation. As more new homes are made available for sale the increased supply tends to hold price appreciation levels down making housing more affordable. Lack of new home construction tends to affect the supply/demand imbalance in the opposite way.

This reduction in price increase is significant when viewed with wage growth. Assuming the year-over-year house price appreciation for the low-med price range is 6% and wages are growing at 3.5%, then the difference is 2.5 percentage points. If the price appreciation was 5.3% then they difference drops to 1.7 percentage points, a reduction of 30%. The result is that increased levels of new housing availability would keep unsustainable levels of home price appreciation more in check with wages.

As can be seen in the chart above, a small percentage of new construction has been focused on the lower tier housing. In areas like Pittsburg, Pa. you have employment growing at a low rate, 24% of sales coming from the lower tier market and only 7% of new construction coming from the low/low-med tiers. These factors are likely to take the “affordable” out of affordable housing.

Freddie Mac (OTCQB: FMCC) announced a new effort to help financial institutions with less than $10 billion in assets access additional liquidity for the financing of affordable housing. The newly created Private Placement PC Swap execution (PPP) enables a lender to swap a pool of loans backed by affordable properties for Freddie Mac Multifamily PCs backed by the loans. The Multi PCs, which are guaranteed by Freddie Mac, can then be sold to investors, returning liquidity to the financial institution. The new structure is a variant of Freddie Mac’s 55-Day Multifamily PC Swap.

“The Private Placement PC Swap allows small financial institutions to access additional liquidity,” said Robert Koontz, senior vice president of Freddie Mac Multifamily Capital Markets. “These affordable housing lenders generally lack the scale to access capital markets in a cost-effective manner. By swapping Freddie Mac PCs through a low-cost execution, we can provide more liquidity for affordable housing. It’s right in line with our mission.”

Freddie Mac also announced its first execution using the new structure with San Francisco-based IMPACT Community Capital, which is a leading impact investment manager investing in underserved communities. IMPACT swapped 77 loans, totaling nearly $141 million, for Freddie Mac guaranteed Multi PCs. All the properties involved in the transaction received financing through 9% Low-Income Housing Tax Credits, and approximately 3,400 of the units financed are affordable to low-income residents, earning 50 percent or less of area median income (AMI). IMPACT can now sell the Multi PCs to investors to acquire additional liquidity for future affordable housing investments.

“Freddie Mac’s execution with IMPACT Community Capital is a unique way to provide more efficient access to capital for the affordable housing space,” said David Leopold, vice president of Targeted Affordable Sales & Investments at Freddie Mac. “This transaction will not only help thousands of residents in the 77 properties financed, but also ensures that IMPACT has the additional funding it needs to make even more mission-driven investments. Freddie Mac is pioneering efforts to encourage investment in underserved markets, and this is yet another example.”

“IMPACT is excited to be one of the first to partner with Freddie Mac on the Private Placement PC Swap execution. It allows us greater flexibility to raise funding from new investors in support of our mission to provide positive impact in underserved communities,” said Michael Lohmeier, chief investment officer at IMPACT Community Capital. “The transaction continues a long history of innovation between IMPACT and Freddie Mac that included partnering on the first two Q-Series transactions in 2014 and 2015.”