Blend announces plans to offload Title365

As it adopts a new software-first approach, mortgage technology firm Blend Labs announced it is selling its title insurance unit. 

After acquiring the Title365 business from Mr. Cooper in a $500 million deal during the mortgage boom of 2021, a new strategic pivot led Blend leaders to the decision to part with its "capital-intensive" title-agency operation, according to company leaders.  

"We began our journey to become a software focused company, enhancing customer value and improving our unit economics by transitioning to strategic platform partnerships rather than building noncore services ourselves," said Blend CEO Nima Ghamsari in the company's first-quarter earnings call. 

"As a significant step in this evolution, we are pleased to announce that we are in an exclusive process with a leading title and mortgage services provider for the potential sale of our title insurance business," he continued. 

The company faced a significant housing market slowdown in the ensuing four years limiting gains from the title acquisition, and a new competitive environment has the San Francisco-based fintech focused on partnerships, which would better provide benefits as the mortgage outlook improves.         

How Rocket's acquisitions impact Blend

The news comes in the wake of the recent merger announcement between Rocket Cos. and Mr. Cooper, a deal that stands to negatively impact Blend's bottom line as they consolidate, analysts predicted. 

Since the deal was announced in March, Blend introduced a new technology partnership with Crosscountry Mortgage and launched a unit dedicated exclusively to working with nonbanks. The pivot toward partnerships gives it the chance to focus on its software offerings, which provide the fintech with better opportunities for growth than the ownership of an outlier business.

"Being the best in the world of the two or three things you do really well is materially better than being just really good at those things," Ghamsari said. 

While the merger has already set off disruption in the mortgage market among lenders, servicers and tech providers, Amir Jafari, Blend's head of finance and administration, said it had the potential to be a "catalytic moment" transforming the way the industry works.

Ghamsari likened it to how Rocket led the push into digital and mobile lending, "things that we all take for granted," he noted.

"The recently announced Mr. Cooper and Rocket alliance has a similar tone to it for the market, and it impacts our own trajectory as well as a result," Blend's CEO said. 

"Their creation of an end-to-end platform underscores the increasing expectation of borrowers to be treated as valued customers, demanding personalized experiences, acknowledging their ongoing relationship with financial institutions."

Blend remarked that Mr. Cooper still continues to be a customer, with its contract not expiring until 2028. Mr. Cooper also retained a small stake in Title365 after the 2021 acquisition.  

Blend by the numbers

The company finished in the red in the first quarter, with net loss attributable to shareholders or $14.7 million compared to $6.5 million in the prior three months. The first-quarter number improved from a $22.1 million loss one year ago. Numbers were adjusted according to Generally Accepted Accounting Principles.

Title365, which is now classified as "discontinued operations" in the company's financial statements, dragged numbers downward in the first quarter with a $2.8 net loss for the unit.

Ghamsari touted new customer additions, some of which signed off in the weeks following the Rocket announcement. 

"We signed a top five mortgage servicer, a top 10 mortgage originator across our mortgage, home equity and closed solutions. These customers will typically deploy in two quarters or so," he said.

Total revenue from still-existing mortgage and consumer banking platforms and services totaled $26.8 million, down from $30.1 million three months earlier, but inching upward from $23.8 million in the first quarter of 2024.