Better.com CEO Vishal Garg says he is personally liable for $750M SoftBank loan | Hacker News Reader

Better.com CEO Vishal Garg says he is personally liable for $750M SoftBank loan

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114 pointsboeingUH6048 comments

I'm currently in late stages with Better, and holy crap is this company on fire (not in a good way).

I've been using them for 3 months exactly, and on my 5th advisor. An advisor is your sole point of contact for the loan... questions, concerns, documents, everything. They don't tell you when the advisor changes, you just notice by chance the little initial emoji of your advisor changed. Realize this means the previous one left, or got fired.

They have no real ticketing. Each worker has a unique and seemingly private email and text...so you start fresh with each one. To the point you don't even want to ask questions, because they'll just fire the person you asked and you'll start fresh again...a week before closing...

The site and flow are slick, that's what drew me in. But the company as a whole is odd and I'd highly recommend not using them.

I had no issues using them last year. As a matter of fact there was a whole subindustry of churning your mortgage as interest rates kept falling. Better.com allowed for that because of how seamless everything is and they would price match any rate you got.

Of course if you have some edge case and tons of questions or issues YMMV and you'd have similiar back and forth. Their call center which seemed to be staffed in the US was always helpful in answering questions or escalating if there are delays in the advisor side.

I had issues with Better last year. Advisors were hard to reach, away on vacation without notice, completely unreachable before 9AM and after 5PM, and unable to adjust to the highly competitive market that was going on last year (needed 15 day close as opposed to 30). I had to switch to a local banker, who was able to provide the speed and flexibility required as they were used to the local market. The local banker also offered the same rate as Better, meaning there was no advantage to Better whatsoever.

Well, did you ever try calling? Because their call center is open late, weekends and resolved any issue I had with my advisor (i.e. an appraisal being late, clarification on cash out refinance as it was my first time doing it)

American Express ran (and still running) a $1000 credit if you used Better.com. Better.com also did not have a clawbaxk clause if you refinanced within 6 months (typical of most loan originators).

They also offered me a waiver on the appraisal while my local bank wanted like $500.

Like I said, there's a reason the churn community leveraged Better.com

Yes, I called anyone and everyone I could at Better, our bid was contingent on those issues being resolved. I could not get anyone with decision making power outside of 9-5 business hours (and it wasn't easy even during business hours, often it would take several hours to get a callback), and also could not get a 15 day close. I had to urgently switch to a local banker to get that kind of service. The local banker started working at 7AM, and would call and email me late into the evening. Perhaps if you have a very run-of-the-mill mortgage situation, Better could work, but I feel like for any mortgages where the conditions are not typical, Better might not be able to respond like a local banker who is familiar with the requirements of the local market.

I signed up for a pre-approval letter through them. I was presented with someone else's pre approval letter, names, address, pre-approval amount and all.

They didn't seem to realize the gravity of the situation when I called to inform them of the leak.

My advice is to bail now while you still can.

My condolences, I was also really attracted by their rates and slick design, but apparently dodged a bullet

I tried doing a refi with better last year and ended up going with someone else because they weren't as competitive on price, and interacting with them didn't feel like the well-oiled machine they were when I originally got my mortgage with them.

Yea I will never not use a mortgage broker again. The middleman and wholesale pricing is worth it!

wow! Phrasing! Are we still doing phrasing?

Alternate title: CEO personally guarantees company financing

"The CEO believes in his struggling company, although it theoretically means he could have an excuse to sell a bunch of Better.com shares or personally declare bankruptcy, this CEO has 5x as much cash and is probably swimming in less debt than most of the middle class."

I agree, there should really be a title change here.

OP here..

I in no way meant the title to be misleading…I included the specific company (Better) because they’ve been in the news recently for multiple rounds of layoffs.

Likewise, this is one of the few times I’ve seen a founder personally guarantee such a big loan for their startup, and it’s more notable considering Better’s business (and valuation) seems to be in shambles.

It is how the CEO himself described it:

"I did personally guarantee three quarters of a billion dollars and I’m personally liable for it."

And it is how the title of the article expresses it:

"Better.com CEO Vishal Garg says he is ‘personally liable’ for $750M SoftBank loan"

He also says he “personally guarantees”

You can look at all the other comments to see how the word choice alone sways people

> wow! Phrasing! Are we still doing phrasing?

i read this in Archer's voice

What's the difference between "personally guaranteeing" a loan and being "personally liable" for a loan? To me they mean the exact same thing: if Better.com (the company) can't pay off the loan then Mr. Garg (the individual) is responsible for coming up with the money.

The difference is that the liable is primarily used in the context of “not initially accepting responsibility for an action, but being forced to”

Whereas “personally guarantees” is used in the context of “I meant to do this to provide confidence”

Given that the CEO is probably worth nowhere near $750MM absent his founders stock, isn't this just him just leaning into a binary outcome? Either Better.com can pay off the loan in 5 years or it's gone broke by the and he gives up his share in bankruptcy. I mean, it cuts out the "just squeaking by" option as him having to give up all his equity in something that was worth hundreds of millions is a big kick in the teeth, but what are the odds Better.com defaults and the stock is worth anything?

A quick search shows Garg's net worth is ~4B. Despite previous actions he deserves some amount of respect IMO for putting his own money on the line here.

Could be based on the valuation of the company based on the latest funding round

Which could be tanking as we speak

I don't see any news of the SPAC merge to have succeeded (estimated for Q4 21)

and this article shows they just laid off 1/3 of staff

https://therealdeal.com/2022/03/15/future-city-better-coms-t...

The good ol' Elon Musk strategy

> net worth is ~4B

net worth is not the same as liquidity

Net worth is the more relevant value for a loan guarantee.

But I'd assume a huge amount of that net worth is due to Better.com's valuation. Valuation is, of course, just the amount the most recent investors paid for their shares, times the total number of shares. And those most recent investors include Softbank, who also gave the founder the loan.

Seems like a pretty scary loop.

If Better can't itself afford to pay the loan back, bringing the personal guarantee into play, what value will the equity have?

Net worth is an abstraction that's generally useful to reason about outcomes, but it's a leaky abstraction.

One would assume Softbank made sure that the debt was collateralized with something other than Better.com shares. I'm sure a good chunk of that 750M is collateralized with better.com shares but I'd be willing to bet they made him put some other stock/investments on the line.

If softbank believes in Better, but not necessarily in Garg, then having him personally guarantee the loan against his own shares is an easy way to push him out cleanly if things go south.

Unless that loan underpins the value

Hard to respect when losing $750m would still leave you a billionaire.

Sounds like a good bet!

I wonder if Softbank demanded this because of what happened at WeWork?

Makes sense. If Better.com crashes, they're probably not getting much from the CEO, because so much of his net worth is tied up in Better and he would just file for bankruptcy. So it seems like this would be a tool to prevent the insanity of what happened with Adam Neumann, in which SoftBank had to pay a shitload to acquire his shares just to get him to leave and not tank the rest of their investment.

The media was long overdue for an update on Better. When last big in the news for the Zoom layoffs in December, the 10Y note yield was approx 1.5% and now approx 3.0%. 30Y mortgage rates went from 3.1% to 4.98%. Certainly not good for Better, but also not good for any mortgage originator whose revenue structure depends on transaction volume.

https://finance.yahoo.com/quote/%5ETNX/history?p=%5ETNX

https://www.freddiemac.com/pmms/pmms30

Reminds me of the old saying:

>If you owe the bank $1000, that's your problem. But if you owe the bank $100 million, that's the bank's problem.

How does better.com make money? what is their business model?

The site says they charge zero commissions & lender fees - does this just apply to the loan recipient? maybe it's just commission from the lenders?

Commission from lenders is how fee free brokers work, I gather. I used one once and they were fairly transparent about how it works.

Better is a direct lender, not a broker. They make their money from the spread between the rate/points offered to the user and the price they can package and sell the loan for.

Ok so why makes them different from any other company selling loans to consumers?

I took out a loan from hitatchi a while back, I’ve just today had about an exciting new rebranding they’ve had changing they’re name and how ecstatic I, as a customer, will be about it

Do I care? No. At start I care about monthly payments and how many months it is. Afterwards I care how long is left.

If better come out with better rates than any other provider that’s great, but there’s no value add for this type of product, it’s just how much it costs.

> Ok so why makes them different from any other company selling loans to consumers?

They are infinitely more convenient and easy to work with from the user side and vertically integrate the entire process. They have loan agents, real estate agents, lawyers, and inspectors. The agent I spoke with last year was very kind. You can also play around with multiple loan options asynchronously and print out different pre-approval letters for the exact amount the house is listed for (this way you don't give away your buying power).

> I took out a loan from hitatchi a while back, I’ve just today had about an exciting new rebranding they’ve had changing they’re name and how ecstatic I, as a customer, will be about it Do I care? No. At start I care about monthly payments and how many months it is. Afterwards I care how long is left. If better come out with better rates than any other provider that’s great, but there’s no value add for this type of product, it’s just how much it costs.

There are multiple ways that Better makes the process "better" than just rates. Rates aren't really competitive if you have good credit. Anyone will give you the market rates for a loan. If you have some really special situation you might see -.5 off your rate through some special thing. My company has a -.25 if you get a home loan from a specific bank and deposit your pay checks there.

Better reduces the overall closing costs by waiving the real estate brokers free if you use their broker. This can easily be >3k. Saving ~1% of a first time home purchase is worth using them imo.

US real estate fees seem crazy to me, the entire cost to me for both selling and buying my last house was below 1.5%, including estate agent, conveyancing, mortgage fee and van hire.

Had I been a FTB it would have been under 1%.

This is why I prefer wholesale lenders and the independent mortgage broker channel. Prices are better for me, period.

I don't understand the context. Why is this a big deal? Why would 90% of the employees bail?

That’s the guy who fired a bunch of people over Zoom a few months ago. Financial issues mainly, here is some context: https://techcrunch.com/2022/02/18/better-com-loses-more-seni...

He did 3 separate mass zoom firings in a span of 6 months.

and what's wild is that they were on a hiring spree leading right up to that moment. I was heavily recruited by six different people there who seemingly knew none of their colleagues. I received the last message the morning of the infamous zoom call, then, crickets. Not that I was entertaining the positions being offered, only that regular messaging literally fell off a cliff from those recruiters internal to Better.

Probably because Better.com went through poorly-executed layoffs.

Because no one wants to start the day thinking every Zoom meeting is the one they’ll fire you. It’s bad for company morale and it’s bad for employee mental health. It should be 99% bail and the C-suite can work the lines themselves. Because fuck any company that tries to normalize doing business this way.

Is he better ?

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