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Roam, a service that promises to help homebuyers find homes with assumable mortgages, has landed $1.25 million in seed funding from backers including the legendary San Francisco-based venture capital firm Founders Fund and Opendoor co-founder (and former CEO) Eric Wu.

With mortgage rates at levels not seen in two decades and many would-be buyers priced out of the market, interest in assumable mortgages has been growing.

“Back in the day, a couple of decades ago, assumable mortgages were fairly common,” DOORA Properties founder and broker Troy Palmquist wrote in an Inman guest column last fall, urging the mortgage industry to “dust off a tried-and-true, already available strategy.”

New York-based Roam announced Wednesday that it’s doing just that, launching services in Georgia, Arizona, Colorado, Texas and Florida, with other markets in the works. The company is currently advertising openings in real estate operations, customer experience, design, product, and business operations.

Raunaq Singh

“Assumable mortgages are one of the most undervalued assets in America,” said Roam founder and CEO Raunaq Singh, in a statement.

opendoor eric wu

Eric Wu

Wu estimates that Roam “has an opportunity to touch 30 percent of all U.S. real estate transactions in the market and provide a solution to the most important problem buyers face today, affordability.”

Wu resigned from his position as CEO in December to be appointed as the company’s president, Marketplace. Since then, has sold more than one-third of the 35 million shares in the company he owned in November. Most recently, Wu sold 500,000 shares of Opendoor on Sept. 11 at an average price of $3.76 under a trading plan he filed in March, which left him holding about 19.6 million shares of Opendoor common stock.

Over the last decade, Singh has gained experience in operations and product at companies like Uber, Opendoor and Culdesac.

Roam, he said, will help homebuyers search for homes with mortgages eligible for assumption and manage the process on behalf of buyers, sellers and agents, charging a 1 percent fee to buyers through closing costs.

In theory, any government-backed FHA, VA and USDA can be assumed by a qualifying borrower, meaning a homebuyer can take on an existing home loan’s terms without applying for a new mortgage. Most multiple listing services even have a “cash to existing loan” box that real estate agents can check to indicate an assumable loan, Palmquist noted.

But it’s rare for homebuyers to assume the seller’s mortgage — in part because many don’t know it’s an option, but also because in many cases, buyers don’t just assume the seller’s mortgage. They also need to compensate them for whatever equity they’ve built up in their home — the listing price minus the remaining mortgage balance.

If a buyer isn’t selling their own home, or hasn’t saved up for what could be a sizable down payment, they’ll have to take out a second loan to seal the deal.

On its website, Roam says it will connect homebuyers who need a second mortgage to preferred partners. While the rate on their second mortgage is likely to be higher than the rate on the loan they’re assuming, “the blended rate offered will likely be more attractive than a new mortgage at current market rates.”

As for real estate agents, Roam promises it “doesn’t touch agent commissions. We’re another tool in every agent’s back pocket to help increase the certainty of sale by making the home more marketable for sellers and more affordable for buyers.”

Technically, any mortgage lender can help homebuyers explore their options for assuming a mortgage when buying a home.

New American Funding advertises such services on its website, noting that FHA loan assumption closing costs are typically between 2 percent and 6 percent of a home’s sales price — much less than the closing costs associated with conventional loans, which can total as much as 20 percent.

“This wave of immobility has created a once-in-a-lifetime opportunity for Roam to bring a much-needed solution to consumers and the housing market,” said former Fannie Mae CEO Tim Mayopoulos, in a statement.

Mayopoulos has joined Roam as a “senior adviser,” while Wu and Founders Fund partner Keith Rabois will serve on the company’s board. Additional investors include #ANGELS Founding Partner Jana Messerschmidt, Fifth Wall co-founder Brendan Wallace and Culdesac CEO Ryan Johnson.

Editor’s note: This story has been updated to note recent sales of Opendoor stock by co-founder Eric Wu, and to correct that Wu was not “ousted” as CEO in December, but resigned to be appointed as the company’s president, Marketplace — a position he currently holds.  

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

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