Digital mortgage servicer Valon set its sights on industry disruption with its Series A fundraise.
The company secured $50 million in funding from a group of investors led by Andreessen Horowitz, Jefferies Financial Group, New Residential Investment Corporation and 166 2nd LLC.
It joins the likes of Blend and Notarize in riding the wave of venture capital investments being pumped into mortgage fintechs. Valon’s model uses vertical integration — direct connection to accounting and payments systems — to avoid the time and money spent on data confirmation between different entities.
To incentivize lenders to use its platform — and cut into the market share held by traditional servicers — Valon needs to demonstrate consistently higher margins and compliance with applicable law and regulation, Valon co-founder and CEO Andrew Wang, told National Mortgage News.
Valon founders (L to R): Jon Hsu, Andrew Wang, and Eric Chiang. (Photo: Business Wire)
Fannie Mae just greenlit Valon’s technology. The company now awaits approval from Freddie Mac and plans to apply for FHA approval this year as well.
“The largest mortgage servicing software controls more than half of all U.S. residential loans, effectively creating a monopoly in the market,” Wang said in a press release, in reference to Black Knight’s products. “This stranglehold has driven servicing costs up nearly 250% in the past decade, and the fees are passed on directly to the borrower.”
Black Knight has been on an acquisition spree of late, buying up DocVerify, Optimal Blue and Collateral Analytics in the past year.
“We created Valon as a challenger brand to address the extreme need for an updated, technology-enabled alternative to keep the borrower better informed,” Wang said. “We’re on the cusp of a mortgage foreclosure crisis comparable to 2008, and the majority of homeowners struggling to make their loan payments are unaware of their options.”
The multiple pain points of servicing are an open secret in the lending community. Back at the 2020 Digital Mortgage Conference, Better.com CEO Vishal Garg proclaimed, “servicing is a black hole. All of servicing sucks.”
This overarching sentiment drove the development of Valon’s platform, Wang said. The company’s mission and structure were informed by his own negative experiences with servicers, which he found to be inefficient and lacking in innovation.
Valon has a headcount of 30 employees and hopes to expand to 100 by the end of 2021. Its pipeline currently totals $30 million in unpaid principal balance.