Tomo, the mortgage fintech launched last year by former Zillow executives Greg Schwartz and Carey Armstrong to focus on purchase loans, cut its workforce by nearly one-third on Wednesday, and is dialing back its plans to expand into additional markets.
“The recent shift in the mortgage and venture capital markets due to the rapid increase in interest rates has impacted Tomo’s business plans, and led us to make changes to our near-term strategy,” Tomo CEO and co-founder Schwartz said in a statement provided to Inman. “As part of these measures, we have reduced the size of Tomo’s workforce by almost a third. This was a last resort, but ultimately something we felt was necessary to maintain a strong foundation.”
Tomo, which announced a $40 million Series A funding round in March that more than doubled its valuation to $640 million, currently offers loans in Colorado, Connecticut, Florida, Georgia, North Carolina, Michigan, Ohio, Texas and Washington.
According to the Nationwide Multistate Licensing System, Tomo Mortgage is also licensed in Illinois, Maryland, Oregon, Tennessee and Washington, D.C. But plans to open for business in those markets appear to be on hold.
“We will also dial back our market expansion plans and will focus specifically on building a tech-enabled mortgage process that delivers faster, less costly and less stressful experiences for homebuyers and the real estate agents that serve them,” within the company’s existing footprint, Schwartz said.
Although Schwartz was not available for an interview, he provided additional details and thanked employees who were let go in a LinkedIn post.
“This is difficult for any company, but especially one like ours built around the idea of service to others, to say nothing of the difficulty our impacted teammates are now facing,” Schwartz wrote. “And to those teammates: Know you helped build Tomo, and I want to thank you for your contributions. I know the world will scramble for your skills because we have witnessed the wonderful and important work you’ve accomplished.
“The reason we are taking such strong measures is to ensure Tomo has enough of a runway for the business to succeed in its mission. While we explicitly don’t offer refinance mortgages because of the risky boom and bust cycle, we’ve still been impacted by the rapid rise in interest rates that has reduced purchase mortgage margins.
“Venture capital is also pulling back in this chaotic economic environment, and thus, we must map out a stable budget that will rely on less capital for longer.”
Tomo Mortgage matches homebuyers with partner real estate agents through its sister company, Tomo Brokerage. Tomo Mortgage LLC and Tomo Brokerage Inc. are owned by parent company Tomo Networks Inc.
In January, Tomo announced its expansion into Florida, Connecticut and Colorado, and the addition of jumbo mortgages of up to $3 million to its product lineup.
In announcing its expansion into Georgia and North Carolina two weeks ago, Tomo said it had a presence in more than a third of U.S. markets.
A number of mortgage lenders have downsized in recent months to adjust to lower refinancing volume, including Better, Pennymac, Guaranteed Rate, Keller Mortgage, Mr. Cooper and Wells Fargo. The nation’s largest mortgage lender, Rocket, expects buyout offers it has made to 2,000 employees will save $180 million a year, while LoanDepot said it does not expect to turn a profit this year and will lay off workers and suspend its quarterly dividend.
More than a dozen Keller Mortgage employees posted notices on LinkedIn last week that they’d been laid off, with some describing the cuts as “huge.”