Mortgage tech provider and title insurer Blend Labs Inc. says it’s laying off 200 employees, or roughly 10 percent of its workforce, as rising mortgage rates curtail refinancings.
In a regulatory filing this week, the company said the workforce reductions will allow the company to shed $34.5 million in annual payroll expenses, and are part of a broader effort to “improve cost efficiency and better align [Blend’s] operating structure with its business activities.”
Blend co-founder and CEO Nima Ghamsari said in a blog post that affected employees will receive a minimum of 18 weeks of pay and continued health insurance, vesting of any previously granted equity into June, and 12 weeks of outplacement services. Blend disclosed that it will cost about $6.7 million to provide those severance payments, employee benefits and stock-based compensation.
“Most of the decisions we made were a function of changes in refinance volumes,” Ghamsari wrote. “With lower volumes, we need fewer people to execute and support those businesses.”
Blend executives had telegraphed plans to cut costs on the company’s March 31 earnings call, citing forecasts that mortgage refinancings will fall dramatically this year as rising interest rates make refinancing less attractive to existing homeowners.
End of the refi boom
Source: Fannie Mae Housing Forecast, April 2022.
In an April 19 forecast, economists at Fannie Mae said they expect lenders will refinance $889 billion in mortgages this year and $558 billion next year, which would represent an 80 percent drop from the $2.8 trillion in mortgage refinancings handled by lenders in 2020.
Before going public last July, Blend paid $422 million to acquire a national title insurance and settlement services provider, Title365, from Mr. Cooper Group. The deal helped Blend boost 2021 revenue by 144 percent, to $234.5 million. But it also helped drive a 129 percent increase in operating expenses, to $313.2 million.
“In our legacy title business, the transaction volume was driven heavily by refinance and obviously, that’s been negatively affected in a significant way,” Blend executive Marc Greenberg said on the company’s last earnings call. “Just like our customers, we’re looking at dedicating the right level of resources, including the right number of people to that business.”
Blend, which provides a software platform and marketplace that allows banks and mortgage lenders to service clients from application to close, employed 577 workers at the beginning of 2021. By the end of the year, Blend’s headcount had grown to 2,276, including 587 Title365 employees working in Chennai, India.
In his blog post, Ghamsari confirmed that Blend’s title insurance business had been particularly hard hit by rising rates.
“We know technology will play an even larger role going forward in helping drive the changes needed for this next chapter,” Ghamsari wrote. “We are responding by renewing our focus on the technology that got us here and improving our capabilities to drive even better, more efficient experiences. However, we also realize that with volumes down, we need to make some changes. Some of our operational businesses, such as our title insurance agency in particular, are seeing the negative impact of higher rates and reduced refinance activity.”