Since acquiring Mortgage Lenders of America last year, Zillow has been pouring money into the development of its Zillow Home Loans platform. Now, however, the real estate giant is pumping the brakes.
In a recent call with investors, Zillow Group CEO Rich Barton said that the company has slowed its hiring of mortgage officers as it works out the kinks in its mortgage software, according to a report by GeekWire.
“As we transition from (Mortgage Lenders of America) to Zillow Home Loans, we are building new proprietary technology to streamline and integrate home loans as our payments platform for Zillow Offers,” Barton said. “We’re already testing out the initial version of our digital mortgage software, but the rollout is taking a bit longer than expected.”
Zillows mortgage division reported $27 million in revenue in the second quarter, according to GeekWire. While that’s up 40% from the prior year, it’s still a $5.3 million loss – although the company had expected the division to lose more this quarter.
The hiring slowdown and the postponement of the software rollout have caused Zillow to lower its projections for the mortgage division through the rest of 2019. Last quarter, the company predicted that the division would bring in between $100 million and $115 million this year. Now Zillow projects mortgage revenue of $90 million to $100 million, GeekWire reported.
Barton said that working through the software kinks will be worth it in the end. Streamlining the real estate transaction, he said, is a trillion-dollar market opportunity.
Barton said that he would like Zillow to eventually be the Microsoft Office of real estate – providing all key services in the sector, GeekWire reported. Eventually, Zillow wants to originate a third of all mortgages attached to transactions through its Zillow Offers platform, which allows home sellers to sell their property directly to Zillow.
“Loan originations are an essential part of our ability to deliver an integrated transaction experience for our customers,” Barton said. “We’re making solid progress, and the long-term expectations for our Zillow Home Loans business and other transaction-related adjacencies remains unchanged.”