Mortgage Company Sindeo Shuts Down

A tech focused mortgage company based in San Francisco California, Sindeo, closed it’s doors yesterday to the surprise of many.  Sindeo provided mortgages in 11 states and had a aggressive goals for expansion.  They started four years ago and it appeared they were on the right path to becoming a major player in the mortgage industry.  So what happened?  Hard to say as there are no definitive details as to why the shut down but my guess is the complicated nature of mortgages made it difficult to turn a profit.  This is the first company to attempt to simplify a complex industry and it won’t be the last.  Getting a low mortgage rate was a focus for Sindeo and they tried to leverage simplified user experience to help get mortgage rates as low as possible.

The fact is; the mortgage industry is extremely complex and while aspects of it can be simplified however much of it can not.  Starting with the borrower; there are so many different types of borrowers and trying to fit them into on grouping is beyond difficult at best.  For example; if you have two borrower’s with the exact same credit scores, exact same housing profile, and both are W-2 employees…are they exactly the same in the eyes of an underwriter?  Not necessarily; reason is one W-2 employee may have expenses on his/her tax returns or that one of  borrower’s actually owns 40% of the company that pays him/her a salary and now you need to find out further information about the business.

Then there is the appraisal, title and the list goes on and on…..that’s all before the loan is closed and enter’s a compliance review and the secondary market.  And the penalties for making an error with compliance disclosures to the borrower are enormous.  Let’s not forget lender buy backs; get a large batch of those and your company could be facing significant headwinds.  From State to Federal regulators it’s hard for a mortgage company to exist let alone exist in more than one State.  Sindeo had the right idea, it appeared to be a reputable mortgage company and by all accounts was performing a valuable service however at the end of the day you can only exist as a company if you are making a profit.

Does this mean other tech focused mortgage companies are facing similar issues and may shut down?  It’s possible but no one knows for sure.