Tech-savvy mortgage broker Sindeo is going out of business just four years after it came to market with a self-service process designed to promote borrower transparency and help revive the struggling wholesale channel. But Sindeo's demise should not be seen as a failure of digital mortgages.

Consumer-direct origination processes are the future of the mortgage industry, said Rajesh Bhat, CEO of Roostify. The digital mortgage technology developer didn't count Sindeo among its clients, but the two companies both launched in San Francisco around the same time.

Sindeo's "challenge was customer acquisition; how they acquired customers was costly," because they purchased online leads, he said.

Sindeo also tried to cultivate relationships with real estate agents, but that takes time "and an ability to service and fulfill in a way they were challenged to do so," Bhat said.

Sindeo co-founder and CEO Nick Stamos
Sindeo co-founder and CEO Nick Stamos

"Startups are hard and simplifying the highly regulated, complex business of mortgages is even harder. I believed we had overcome the biggest hurdles, but unfortunately, we didn't," said a letter from Sindeo co-founder and CEO Nick Stamos posted on the company's website.

The letter did not go into greater detail on why Stamos and co-founder Ori Zohar decided to close the San Francisco-based mortgage broker and executives did not respond to requests for comment. Still, it's a fact of life in the mortgage industry: when loan production declines, some lenders are forced to shut their doors.

"What they tried to market heavy on was their technology that allowed the consumer to do more and see more into the process," which is not too different from what mortgage companies like loanDepot or Quicken are doing, he continued.

"But when you are a consumer-direct company touting your tech, and you position yourself as a fintech to a certain extent, you need to build a strong brand very quickly," Bhat said. Sindeo might not have had to capital to do that and ultimately lower its customer acquisition cost, he said.

It's a lesson that other digital mortgage startups should heed.

Sindeo's goal was to bring greater transparency to consumers through an online lending process, Stamos told National Mortgage News in 2015. The company eschewed traditional loan officers, compensating its mortgage advisors with a salary, plus giving them a bonus based on customer satisfaction.

"When I started looking at mortgage in 2013-2014, it seemed very similar to the experience I had in 2010, which probably was very similar to the experience people had in 2000 or 1990, to be quite honest," Stamos said in the 2015 interview. "It just got me thinking that there probably is a better way for a consumer to go through that end-to-end journey and thinking about the most important financial decision many people make."

In April, Sindeo won the "Best Consumer Lending Platform" award from FinTech Breakthrough. It also had a net promoter score (a measurement that looks at the loyalty of a firm's customer relationships) of 81, Stamos pointed out in the letter.

But mortgage companies cannot survive on accolades alone.

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