Nima Ghamsari started his tech career a decade ago, around the time when millions of people were losing their homes during the financial crisis.
That's when Ghamsari came up with the idea for Blend, a fintech platform that makes it easier for aspiring homeowners to get a mortgage. The Silicon Valley startup, whose name is a play on "better lending," launched in 2012. It quickly became one of the fastest-growing mortgage fintech platforms at a time when the housing market was bouncing back.
"So much of building a company is timing, and the timing was just right for us to do something in mortgage," Ghamsari told Protocol.
This was underscored Wednesday when Blend announced that it has raised another $300 million in venture capital funding, doubling its valuation to $3.3 billion in just five months. The Series G round, which the startup plans to use to develop new products and services, was led by Coatue and Tiger Global Management. Blend, which has expanded to other markets, including auto and personal loans, has now raised $685 million.
It's a dramatic change from a year ago when Ghamsari, Blend's CEO, encountered his second economic crash. Like other startups, he said, Blend "felt pressure to put our foot on the brakes" as the pandemic upended the economy. But it also became clear that the crisis presented opportunities."The pandemic has greatly accelerated the need for a modern platform because consumers are being forced to do things in different ways," he said.
Ghamsari saw the need for a modern platform early in his career. He joined data analytics company Palantir in 2008 after graduating with a computer science degree from Stanford. Assigned to the team that evaluated the mortgage assets of banks, he was stunned by the antiquated software platforms he had to deal with.
"They're very paper-based, very manual and they were built 20, 30, 40 years ago," he said. That led him to think: "Why hasn't somebody built a modern platform … to serve their customers in a modern way?"
Ghamsari also saw the clunkiness of the consumer side of the mortgage experience firsthand around five years ago when he was shopping for one. One bank emailed him PDF forms which he had to print, fill out and scan before sending back to the bank. "I replied that I don't have a printer or scanner and my handwriting is unreadable; I'm not gonna do this," he said.
Ghamsari also frowns on the process of closing escrow, which typically involves having homebuyers go over and sign a thick stack of documents. "You're going to read 600 pages in seven minutes?" Ghamsari said. "How the hell is that possible?"
The Blend platform helps banks automate most of the mortgage process, including retrieving financial data, evaluating applications and even the closing of escrow. "We do all that work for them behind the scenes," Ghamsari said.
Tech companies have long tried to "modernize" the home-buying process, and the pandemic has opened up new opportunities, Jonah Crane, a partner at the Washington D.C.-based investment firm Klaros Group, said.
"It's hard to do and is a complex process," Crane said. But he sees this as the perfect time to try to reinvent the process. "If the pandemic doesn't catalyze a more rapid improvement and digitization of the mortgage origination process, I'm not sure what will," he said. "People are shopping for homes more online, have taken virtual tours and are buying homes without ever setting foot in them — which is something that a lot of people wouldn't wouldn't have dared to think about a year ago."
But building the Blend platform wasn't exactly a seamless process, Ghamsari said. Some homebuyers simply didn't have easy access to the financial information needed for processing applications. One of the first customers to use the platform uploaded a photo of their cat instead of a paystub.
"That was a common thing," Ghamsari said. "That gives you an insight into how fragile the process is." But such glitches also highlighted the benefits of the platform, he said: "Imagine doing that with a human where it takes them three days to get back to you versus a system that can flag that in real time and say, 'Hey, actually this is not a pay stub, please double check.' Those are the kinds of things that our system was able to pick up on."
But his team had to grapple with a key challenge: with mortgages, automation wasn't always ideal. Some homebuyers still needed a bit of hand-holding through the process.
"One thing we underestimated early on was how much the human on the bank side was involved," Ghamsari said. Some mortgage applicants simply preferred to work with a real person. "We didn't support that," Ghamsari said. "I remember loan teams at these banks that were working with us who were frustrated; 'You know we can't even work with our customer on this thing. It's just an online thing.'"
That complaint highlighted "what it means for a human to want to work with another human" on the Blend platform, Ghamsari said. Blend eventually evolved into a "more fluid platform," where clients have the option of working with a bank staff member at different points of the process.
These tweaks to the Blend platform made it one of the most prominent players in fintech mortgage lending, which has grown from $34 billion, or 2% of total originations in 2010 to $161 billion, or 8% of the market, in 2016, according to a 2018 report from the New York Federal Reserve Bank.
"Fintech lenders offer a faster origination process that is less sensitive to fluctuations in demand than traditional lenders," the report said.
Seth Appleton, president of the Mortgage Industry Standards Maintenance Organization, which helps develop standards for the industry, said there are still regulatory and compliance issues that need to be addressed with the rise of fintech mortgage lending. But "it's clear that we are getting closer to the holy grail of a fully digital mortgage, and that there are significant industry and consumer benefits to doing so," he told Protocol.
Despite the pandemic downturn, Blend said it handled more than $1.4 trillion mortgages and consumer loans in 2020. But the crisis remains a powerful reminder of how things could suddenly take a turn for worse, Ghamsari said. In fact, he spoke with Protocol the day Trump supporters rioted in Washington, D.C.
"Especially with the stuff going on at the Capitol, there's a lot of stress around us," he said. "There's lots of things going on around us that are negative. I want us to stay focused and to stay positive at a time when things are not so conducive to that on the outside."
Blend is one of the Silicon Valley startups that has successfully navigated the pandemic downturn. It has avoided layoffs, and added more than 200 employees since the crisis escalated in March 2020. The company now has around 600 employees, up 60% from December 2019.
But having now lived through two downturns, and with the ongoing uncertainty about the pandemic and the economy, Ghamsari said he wants Blend to be prepared for the unexpected. Raising more capital is definitely part of that, he said.
"I can't control the stuff around me, nor can I predict it with any sort of accuracy," he said. "All I can do is make sure that we're always ready for a downturn. The same thing that happened last March where I felt like we were in a good position because we had done a good job of being well-capitalized."
