In March 2022, embattled online mortgage company Better.com, once valued at $6.9 billion, announced layoffs of approximately 3,000 employees. This followed a previous incident where 900 workers were fired over Zoom. In this article, we'll discuss what happened, why it occurred, and the potential future impact on the company and the industry.
One of the main reasons behind Better.com's decision to lay off approximately 3,000 employees was the dramatic drop in origination volume due to rising interest rates in the residential real estate market. The company had expanded rapidly during the pandemic when interest rates were low, but with the recent increase in mortgage rates, Better.com faced economic pressures. The Federal Reserve's upcoming interest rate hikes also contributed to the need for streamlining operations and reducing the workforce to adjust to the volatility in the interest rate environment and refinancing market, as stated by Better.com CFO Kevin Ryan.
As a result of the layoffs, Better.com is conducting personal, one-to-one calls with affected employees and providing them with significant financial, healthcare, and transition support. Some employees were unintentionally notified of their separation from the company ahead of schedule when severance payment information was made available, which the company acknowledged as mishandling and clarified that it was not the intended form of notification. This incident occurred weeks after the CEO of Better.com faced criticism for firing 900 employees during a Zoom call.
Better.com's layoffs likely aim to reduce operational expenses and enhance financial health by streamlining operations and increasing profitability. In the short term, this can result in significant cost savings, though it might involve costs related to severance and restructuring. Strategically, the company may be shifting focus to more profitable products or markets, enhancing its competitive edge. By reallocating resources and optimizing its workforce, Better.com could be positioning itself for innovation and adaptation to changing market conditions, ultimately aiming for sustained growth and success despite the immediate challenges.
The future impact of Better.com's layoffs on the real estate industry is unclear. However, the company's downsizing due to rising interest rates and reduced origination volume may signal a shift in the market. As mortgage rates increase, other online mortgage lenders may also face challenges and need to adapt their strategies to remain competitive in a changing environment.
Better.com laid off 3,000 employees due to a drop in origination volume and rising interest rates, which forced the company to streamline operations. The layoffs, following a previous incident of firing 900 workers, may impact the company's future and industry standing. These developments could signal a shift in the market, with other online mortgage lenders potentially facing similar challenges. Better.com's actions might indicate future strategic moves to adapt and remain competitive in a changing environment.
