Checkr vs. The Work Number (And Your Processors)

The mortgage business is full of incumbents that have owned their corner of the market since “The Bourne Identity” topped the box office. OB. MSP. Encompass. FICO.

And across nearly every category, there’s a VC/PE-backed challenger making roughly the same pitch: We aren’t like those old-school incumbents. Our tech is better. Our process is more modern. The value prop is stronger.

Sometimes it works. But market share shifts tend to be incremental in mortgage, where familiarity, switching 💡costs & fear heavily favor the incumbent. Which makes what’s happening in the verification space…

Equifax’s The Work Number has one of the biggest moats in mortgage. Checkr is now coming directly at it. After acquiring Truework & now Truv, Checkr has assembled a verification business w/ the data, distribution & technology to potentially become a very serious threat. 

The question is whether lenders — & their processors — are finally ready to move, which we’ll tackle in today’s edition of The Mortgage Scoop. That story is exclusively for paid subscribers (here’s a 10% discount). Plus, a behind-the-scenes look at the Matador-GoRascal 🐶 merger.

Apurva Sanghavi had 50 LOs, a $200M run rate & a problem familiar to a lot of broker-owners: he was hitting the ceiling. At a flat-fee shop, you're clipping roughly $1K a loan. Sanghavi figured he needed 150+ originators before the model started throwing off meaningful net income. Everything between 50 & 150?

“Purgatory,” he told me.

So on Tuesday, Sanghavi made his move, which was first reported by The Scoop. His Houston-based Matador Lending officially merged into Scott Valins's Brooklyn-based GoRascal, which has roughly 415 LOs & is on pace to clear $5B this year. Matador keeps its name as a DBA. GoRascal gets a major source of volume in Texas, a top-three mortgage market where it wants a much bigger presence.

Sanghavi had other offers. And at least one would've paid him a lot more. A local community bank wanted to buy the whole team & build a mortgage division around them. W-2s, acqui-hire, real money for Sanghavi personally. Annnnd he passed. “It would have been such a cultural change to go to a bank,” he told me.

Sanghavi kicked the tires on a few other shops across channels, including retail. But a serendipitous cohort in Amir Syed's Go! Coaching connected him w/ Valins, who also runs a flat-fee model. And that's where this gets interesting.

The big flat-fee platforms in the broker channel are increasingly commoditized. A couple hundred bucks here or there, a few different tools, but similar basic economics. So… if the money looks roughly the same, why pick one over another?

For Sanghavi, it came down to culture, licensing & fulfillment. Matador was licensed in four states. Tennessee alone took months, & Sanghavi actually lost an LO over it. That LO saw the GoRascal announcement & called him the next day. GoRascal is licensed in all 50 states. (Even NEXA isn't licensed in NY & MA.) 

It’s worth highlighting a major factor that nobody puts in the recruiting pitch: running a 50-LO mortgage company sounds like a huge pain in the ass. Recruiting was Sanghavi. Sales coaching was Sanghavi. Fulfillment ran through one lieutenant. At 40-50 LOs, both were stretched pretty thin, & that's before compliance, audits & all the other overhead that comes w/ running the company.

GoRascal already has the platform, processors & ops staff, &, like Matador, runs on Slack & does a lot of business w/ UWM. Sanghavi also gets turnkey access to Pylon, where GoRascal was early. (He's still onboarding but says his initial pricing tests are already coming back pretty aggressive.) More than anything, he said it just felt like a good culture fit. Valins has already done a lot of the stuff Sanghavi wants to achieve. 

Now for the fun part: Can Sanghavi actually take Texas from $200M to $1B? His math is 40-50 originators averaging $15M-$20M apiece. He plans to develop the Houston bench, then recruit market leaders who can replicate it in Austin & San Antonio.

The fastest path from $200M to $1B is still adding productive LOs (FWIW, GoRascal doesn’t tend to hire newbie LOs). Which means Sanghavi is about to compete aggressively for talent — much the same way Valins just competed w/ banks, broker shops & retail firms to land Matador. And now Sanghavi’s got a much bigger platform to sell.

(Ed. note: Valins also has a v unusual & fun backstory. NMP's profile on the rise of GoRascal is worth a read.)

On paper, this one reads like a classic consolidation story. Checkr already owns Truework, which it acquired last year. Now it owns Truv, too. So that’s two big-time challengers in the verification market under the same roof, giving Checkr a much stronger platform to go after Equifax's The Work Number.

But after talking to the CEO of a mid-sized mortgage lender who is extremely into verification workflows (I guess we all have our thing???), I'm not sure intrigue around The Work Number itself is even the most interesting part of this deal. Here’s what I mean: