A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Register to receive future editions, straight to your inbox.
Refinancing a home loan has long been a complicated and expensive process. The costs can be so high that most experts suggest that if a borrower can’t reduce at least 75 basis points from their current mortgage interest rate, refinancing isn’t even worth it.
Now, two real estate technology leaders are joining forces to reduce these costs.
Open doorwhich buys homes directly from sellers and has a title and escrow business, is acquiring part of Doma, a real estate technology company that automates title searches, the companies told CNBC exclusively. Doma says it uses machine learning and artificial intelligence to make real estate closings – particularly title, escrow and underwriting – faster and more affordable.
“We are completely rebuilding and automating, like most of the other pieces of technology that Opendoor is working on…to eliminate time and money for customers,” said Lucas Matheson, president of Opendoor.
Terms of the deal were not disclosed.
Since 2024, Doma’s technology has been used in a Fannie Mae pilot program designed to reduce title insurance costs on eligible refinance transactions. It has just been extended until 2027.
Under the program, certain refinancing transactions determined by Doma to have low title risk may be sold to Fannie Mae without the need for a lender’s title insurance policy or an attorney’s opinion letter. So far, that represents about 80% of refinancing candidates, according to Doma.
However, title insurance is only one part of the refinancing process. Closing costs include other services, such as setting up an escrow account, ensuring all mortgages are paid off, paying transfer fees and taxes. Part of this operation is still manual and strongly service-oriented; this can take several days and add thousands of dollars to the cost of refinancing.
“This program grew so dramatically in the last year that we were operating our own closing and escrow agency, and it is sizable, and we were doing a decent job of keeping up, but, frankly, the demand was outpacing our ability to close deals,” said Max Simkoff, CEO of Doma. “We simply didn’t have the resources to manage both the technology needed for risk decision-making and closing.”
So Doma looked for a company with the technology to expand its business as much as possible and ultimately chose Opendoor, whose technology can perform closings much more efficiently. As a result, the price charged for fences is lower than the industry average, according to Simkoff.
Following the acquisition, 85 Doma employees will join Opendoor.
However, the refinancing industry is not what it was just a month ago. The war with Iran caused mortgage rates to rise sharply and quickly. Requests to refinance a home loan plummeted in response. Demand is down 20% in the last four weeks alone, according to the Mortgage Bankers Association.
“Refinancing in today’s market represents the most difficult homeownership experience,” Simkoff said. “No one who refinances a six-and-a-quarter 30-year fixed mortgage is doing it because they want to, they’re doing it because they have to.”
But Simkoff and Matheson say the timing of this collaboration doesn’t matter.
Last year, they note, mortgage rates were higher and the program with Fannie Mae saw huge growth again. Even if the pool of refinances shrinks, the share of borrowers using Opendoor’s closing services with Fannie Mae will increase, according to Matheson.
“That’s about $1,100 per refi that a family would save without injecting risk into the system,” he said. “Just for context, Doma has a history of zero defects in this program.”