Valon is a lender and servicer of residential mortgages. Its goal is to give every homeowner more authority.
If you’ve ever applied for a mortgage, you are aware that it is among the most difficult procedures available. Over the term of the loan, keeping up with payments and dealing with customer support is not easy.
To achieve this, tech-enabled mortgage servicer Valon Mortgage revealed this morning that it has raised $50 million in a Series A round of funding. Even by the standards of today, this sum is significant for the time.
The New York-based startup formerly known as Peach Street had Andreessen Horowitz (a16z) lead the investment. Along with returning investors Jefferies Financial Group, New Residential Investment Corporation, and Fortress Investment Group LLC, The money also came from 166 2nd LLC, the family business of WeWork co-founder Adam Neumann.
Previously, Alley Corp., Soros, Kairos, and Zigg Capital, as well as veteran businessman Kevin Ryan, raised $3.2 million for Valon as seed capital data collected by Valon 50m mortgage a16z seriesazevedotechcrunch.
Aiming to break up what they see as “a monopoly in the market,” Andrew Wang, Eric Chiang, and Jon Hsu started Valon in June 2019 with the knowledge that “the largest mortgage servicing software business” (software behemoth Black Knight) was in charge of more than half of all U.S. residential loans.
The fees are passed directly on to the borrower, and this stranglehold has caused servicing expenses to increase by about 250% over the last ten years.
Fannie Mae recently gave Valon the go-ahead to service its government-sponsored mortgages in conjunction with the hike. (Servicers of loans, for those who are unfamiliar, do tasks like collecting payments on behalf of a lender.) Wang predicts that the endorsement will only accelerate Valon’s explosive growth.
He said that within a year, they had gone from having no contracts committed to servicing $10 billion in mortgages.
Valon now operates in 49 states and this year plans to expand to New York.
The “lack of service” offered by other servicers irritated Wang, a former investor in the mortgage servicing industry. As a result, he collaborated to create Valon with Chiang and Hsu, who had prior technical and product experience at Google and Twilio.
With its cloud-native platform, the business seeks to provide what it calls a borrower-oriented experience.
Unlike mortgage originators who actually lend the borrower money, a mortgage servicer deals with the borrower throughout the loan’s term, which can run anywhere from 15 to 30 years.
According to Wang, this includes things like collecting payments on the lender’s behalf and offering support and direction to the borrower through difficult times. Traditional mortgage servicers use outdated technology and offer subpar customer service. By offering complete self-service capabilities and transparency to homeowners, Valon hopes to alter this dynamic.
The business claims that by vertically integrating the entire process, its technology has the potential to reduce the cost of servicing mortgages by as much as 50%. The platform is designed on Google Cloud with security as a “first principle” and includes features like intrusion detection and default encryption, the business claimed.
Millions of Americans quit paying their mortgages in 2020 as a result of the coronavirus epidemic’s financial difficulty. This led to requests for forbearance (payment suspension) and foreclosure moratoria.
The demand for a modern mortgage servicer was significantly pushed by the epidemic, according to Wang. “Due to the outdated technology and inability of current servicers to respond to requests, homeowners experienced significant financial stress and had trouble finding the best alternative and support… Forbearance and foreclosure amenities will stop in 2021, and this need will grow even more urgent.
She stated in a written statement that “homeowners are faced with awkward websites, call centers, and frequently false information.” They now have a dependable software-driven advisor in Valon who can offer in-depth, accurate information that complies with regulations in both good and negative situations without having to make a phone call.
She said that the Fannie Mae endorsement just serves to further validate the team’s platform.
Therefore, it should come as no surprise that significant sums of money are being invested in the area in an effort to simplify, digitize, and make the process more transparent.
By the end of the year, Valon intends to hire three times as many people, for a total of roughly 100 people, and to expand its portfolio of mortgage servicing rights (MSR) contracts.
Faq’s
Ans. Series A
Ans. Mortgage
Ans. $50M
Ans. a16z
Ans. Angela Strange
