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Refinancing a home loan has long been a complicated and pricey process. The costs can be so high that most experts suggest if a borrower can’t shave at least 75 basis points off their current mortgage interest rate, the refinance isn’t even worth it.
Now two property tech leaders are joining forces to lower those costs.
Opendoor, which buys homes directly from sellers and has a title and escrow business, is acquiring part of Doma, a property 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 — specifically title, escrow and underwriting — faster and more affordable.
“We’re in the process of 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 was just extended through 2027.
Under the program, certain refinance transactions determined by Doma to have low title risk may be sold to Fannie Mae without needing a lender’s title insurance policy or an attorney opinion letter. So far, that has been about 80% of the refinance candidates, according to Doma.
The title insurance, however, is only one component of the refinancing process. Closing costs include other services, such as setting up an escrow account, making sure all the mortgages are paid off, paying transfer fees and taxes. Some of this is still manual and highly service-oriented; it can take several days and add thousands of dollars to the cost of the refinance.
“This program grew so dramatically last year, we were operating our own closing and escrow agency, and it’s a sizable one, and doing a decent job of keeping up, but, frankly, the demand was outstripping our ability to close transactions,” said Max Simkoff, CEO of Doma. “We just did not have the resources to be able to do both the tech for the risk decisioning and the closing side.”
So Doma went looking for a company with the technology to scale its business as far as possible and ended up with Opendoor, whose technology can do the closings much more efficiently. As a result, the price that it charges for closings is lower than the industry average, according to Simkoff.
Following the acquisition, 85 employees from Doma will be joining Opendoor.
The refinance business, however, is not what it was just a month ago. The war with Iran has caused mortgage rates to rise sharply and quickly. Applications to refinance a home loan have been sinking in response. Demand is down 20% in just the past four weeks, according to the Mortgage Bankers Association.
“Refinances in the current market represent the most challenged home ownership experience,” said Simkoff. “Nobody doing refinance at 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 both Simkoff and Matheson say the timing of this collaboration is irrelevant.
Last year, they note, mortgage rates were higher, and the program with Fannie Mae still saw enormous growth. Even if the pool of refinances shrinks, the share of borrowers using Opendoor’s closing services with Fannie Mae will grow, according to Matheson.
“This is around $1,100 per refi that a family would save while injecting effectively no risk into the system,” he said. “Just for context, Doma has had a zero defect track record in this program.”