Better lost $40M. Its CEO has never been bolder

Better Home & Finance is shedding its direct-to-consumer identity as it leans on artificial intelligence to push it out of a long financial slump.

The now self-described AI-native mortgage platform on Friday promoted growth opportunities from bigger deals, including a new partnership with an unnamed, top-5 nonbank originator. Exuberant founder and CEO Vishal Garg continued to tout his company's AI bona fides, although the digital lender remains mired in the red. 

The company posted a $40 million net loss in the fourth quarter, a slight increase in loss from the prior period but a 32% improvement from losses in the final quarter of 2024. While revenue was flat over the past two reporting periods at $44 million, it was an improvement from $25 million from the year ago period. 

Better's funded loan volume grew 56% year-over-year to $1.5 billion in the year's final quarter, just over a third of which came from refinance activity. The firm's Neo Home Loans retail arm accounted for $462 million of that production. 

Executives issued guidance of $1 billion in monthly loan volume by the end of May. The company is also sticking to its projection of adjusted EBITDA break-even by the end of the third quarter, as it sat at a negative $24 million in EBITDA in the recent quarter.

Garg's ambitious vision

In a lengthy earnings call Friday, Garg described Better's advantageous position in the evolving mortgage landscape. That included a confident forecast for the lender's work brokering Credit Karma Home Loans, which has secured 30,000 mortgage pre-approvals since October. Better is beginning with refinance offerings, before rolling out home equity and purchase products.

"In the long term, we expect Credit Karma Home Loans powered by Better to be the single largest originator of mortgages in this country," said Garg in response to an analyst's question. 

The company is also leaning into home equity line of credit products in its new deal with the large unnamed lender, while its partnership with Finance of America is already live. Garg also hinted at a deal with a large personal lending fintech, which will be similar to the Credit Karma arrangement.

"I think you should see us launch one marquee partner every quarter, and you should see us have a bunch of smaller partners launch every quarter," said Garg. 

ChatGPT and stablecoin potential

Earlier this month Better debuted its Tinman integration with ChatGPT, where any mortgage player can underwrite and fulfill loans using a custom tool. Better claims the median time to underwrite for ChatGPT originators is a little over 2 minutes. Garg said many banks have shown interest in the tool, particularly given regulatory changes weighed by the Federal Reserve to encourage market participation. 

"We're going to see the bank bid for mortgage explode, the bank bid for HELOC explode," he said. "And we are uniquely positioned to accommodate the bank bid for that vis-a-vis our competitors in HELOC land."

Better is also bringing stablecoin to the mortgage landscape, with a secured tokenized credit facility that Garg has suggested could lower funding costs by 100 basis points. He said the company is six months away before the new endeavor will reach Better's bottom line. 

Investors had a sharper reaction to the earnings Friday, as Better's stock opened at $37.21 but fell almost 8% to around $33.78 by midday.