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Zillow buying mortgage pricing engine

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Editor’s note: This story has been corrected to note that an offering of Zillow shares that closed Sept. 24 was a follow-on offering dilutive to existing shareholders, not a secondary offering of previously issued shares.

Real estate information marketplace Zillow Inc. says it has an agreement to acquire mortgage product and pricing engine Mortech Inc. that will accelerate the development of Zillow’s Mortgage Marketplace.

Zillow said the acquisition of Lincoln, Neb.-based Mortech for $12 million in cash and 150,000 shares of stock is expected to close by the end of the year, allowing it to deliver marketing and productivity solutions to mortgage professionals to help them manage their business, and convert more borrower contacts to funded loans.

Consumers currently submit more than 1 million mortgage loan requests per month on the Zillow Mortgage Marketplace, the company said, receiving 25 customized quotes that are generated using automated pricing engine’s like Mortech’s. Consumers can compare mortgage quotes alongside more than 22,000 reviews of lenders.

Mortech’s 39 employees provide subscription-based software solutions that include a product and pricing engine, a lead management platform, and marketing tools to keep lenders’ brand and rate quotes in front of borrowers throughout the mortgage shopping process.

Zillow purchased Mortech for three reasons, said Zillow CEO Spencer Rascoff on the company’s third-quarter 2012 earnings call today: 

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  • It’s an important technology for current and potential lenders who advertise on Zillow.
  • Mortech’s relationship with other lenders enhances the likelihood that they’ll look to advertise on Zillow.
  • Mortech’s customer relationship management software will increase the value of advertising on Zillow for lenders and entice more to advertise.

When Zillow rival Trulia launched its own mortgage center in September, Mortech was the sole provider of automatic loan quotes from participating lenders. Other sites including Zillow, typically work with a variety of loan pricing engines including Mortech.

Zillow spokeswoman Cynthia Nowak said the company intends to honor "all of Mortech’s contractual commitments to their partners."

"We want lenders who use Mortech to get as much business as possible and we expect to maintain all partnerships that deliver more contacts to lenders," Nowak said. "And so, we’re happy to continue that relationship."

A similar mortgage shopping service launched by Google in 2009 at one point offered lenders the choice of five pricing engines: Mortech, NYLX, Optimal Blue, Price My Loan, and Open Close. Google’s AdWords Comparison Ads for mortgage were folded into Google Advisor before Google shut down its mortgage comparison service altogether, Search Engine Watch reported in February.

Mortech will be Zillow’s fifth acquisition in less than two years. Last week, Zillow announced the acquisition of collaborative shopping platform Buyfolio. In May, rental relationship management software provider RentJuice Corp. was the target of a $40 million deal.

In November 2011, Zillow paid $7.8 million for Diverse Solutions, a provider of listings content that also powers property searches for real estate agents’ websites and mobile platforms. That purchase follwed the April 2011 acquisition of listing syndicator Postlets.

Zillow may still have money to burn, having raised $156.7 million after expenses in a follow-on offering that closed Sept. 24.

In a regulatory filing, Zillow said it would have "broad discretion" in spending that money, and that it could use a portion "for the acquisition of, or investment in, technologies, solutions or businesses" that complement Zillow’s business.

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