Billion Dollar Unicorns: How Will Ellie Mae Handle Looming Mortgage Worries?

According to a study by the Mortgage Bankers Association, the US lenders are expected to issue a smaller amount of mortgages in 2018. Total mortgage originations are expected to fall to $1.60 trillion this year from $1.69 trillion in 2017. The amount of new loans to refinance a home are expected to drop 28.3% to $430 billion and the amount of new mortgages to buy a home will grow 7.3% to $1.2 trillion in 2018. The market is being impacted by low housing inventory and rising interest rates. Despite the weak market projections, Billion Dollar Unicorn club member and mortgage origination services provider Elli Mae (NYSE: ELLI) is continuing to do strong business.

Ellie Mae’s Offerings

Ellie Mae was founded in 1997 by serial entrepreneur Sig Anderman. Prior to founding Elli Mae, Sig had set up CompuFund, Inc., a computerized mortgage banking company and Inspectech Corporation, a computerized home inspection company.

Ellie Mae provides a platform that electronically connects mortgage professionals to the mortgage lenders, investors, and service providers to help with the origination and funding of residential mortgages. Its proprietary offering Encompass automates the mortgage management solution and services in a single platform that helps cut costs for lenders. It is a system of records that keeps data secure and documentation accurate. Lenders can originate, underwrite, and close loans using one system, instead of shifting across different applications.

Its other offering AllRegs provides research, reference, education, and publishing resources for the entire mortgage industry to ensure that the vendor remains compliant to the various regulations. It also offers a sales engagement software that streamlines the mortgage sales cycle so that teams can close business faster.

Ellie Mae’s Financials

Ellie Mae earns revenues in the form of licensing and subscription fees for its tools. Fees are charged on a per closed loan basis. For its recently reported fourth quarter results, the company saw revenues grow 17% to $112.9 million. During the quarter, net income fell from $10.9 million a year ago to $9.9 million. Adjusted earnings came in at $0.33 per share. The market was looking for revenues of $108.2 million and earnings of $0.25 per share.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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