Valon Raises $50 Million Series A Funding, Led by Andreessen Horowitz, and Uses Technology to Challenge the Traditional Residential Mortgage Servicing Industry’s Status Quo
Company obtains Fannie Mae approval, offers a better borrower experience and solutions for navigating forbearance and foreclosures without defaulting on loans so more Americans can stay in their homes
NEW YORK--(BUSINESS WIRE)--Valon (formerly known as Peach Street), a tech-enabled residential mortgage servicer, today announced a $50 million Series A, led by Andreessen Horowitz, with participation from prior investors Jefferies Financial Group, New Residential Investment Corporation, an affiliate of Fortress Investment Group LLC, and 166 2nd LLC. Total funding to date now exceeds $53 million, including capital from seed investors such as serial entrepreneur Kevin Ryan’s Alley Corp, Soros, Kairos, and Zigg Capital. The deal closed as the company obtained approval by Fannie Mae to service its government sponsored home loans. Andreessen Horowitz’s General Partner, Angela Strange, and Blend President and ex-Fannie Mae CEO Tim Mayopoulos have joined Valon’s Board of Directors.
“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,” said Valon Co-Founder and CEO, Andrew Wang. “Currently, the largest mortgage servicing software controls more than half of all U.S. residential loans, effectively creating a monopoly in the market. This stranglehold has driven servicing costs up nearly 250% in the past decade, and the fees are passed on directly to the borrower. We created Valon as a challenger brand to address the extreme need for an updated, technology-enabled alternative to keep the borrower better informed.”
Rising Residential Mortgage Crisis
According to the Federal Reserve Bank of New York, household debt increased by $87 billion to $14.35 trillion in the third quarter of 2020. The vast majority of the debt increase - nearly $85 billion - comes from mortgage balances as many people moved from dense cities to suburban and rural areas during the pandemic. Unemployment rates soared, and as a result delinquency rates and the percent of loans in forbearance increased rapidly since the start of the pandemic. According to Moody’s Analytics, an estimated 30% of Americans with home loans - nearly 15 million households - stopped paying their mortgage in 2020 due to the economic strain of the pandemic. Later this year, the federal moratorium on foreclosures and hardship leniency for forbearance will expire.
Mortgage servicers collect payments for principal, interest, taxes and insurance. They are selected by the lender and often change several times over the life of a mortgage. Software to manage these historically manual and repetitive processes saves money for the lender and reduces compliance risks. But the borrower suffers as their loan is passed around among several servicers who can lock in long-term servicing contracts. In fact, the servicers are incentivized and allowed to change fees without borrower consent.
For servicers, there’s little upside to improve the current, antiquated process. On average, it can take up to 18 months for a major bank to switch to competing software. Changing software vendors is a logistical nightmare and fraught with compliance risks. Valon addresses these challenges with a complete vertically integrated stack that provides both borrowers and lenders real time visibility into their loans. For lenders, this tech-forward and regulatory compliant servicing helps them become more competitive. For homeowners, it provides access to creative bridge solutions, when needed, and eliminates the long cycles and paper-intensive process associated with loss mitigation.
Simple and Secure Digital Mortgage Management
Valon’s software platform delivers a borrower-oriented experience: a simple interface, transparent access to information, and expert customer service. Borrowers have access to self-service features to access their mortgage information and manage their payments from wherever they are. Lenders can request access to real-time API data feeds to view performance of their borrowers and reconcile transaction data.
The technology has the potential to reduce mortgage servicing costs by up to 50% by vertically integrating the entire process, increasing borrower self-service capabilities, and driving operational efficiency. Its cloud-native platform is built on Google Cloud with security as a first-principle, protecting borrowers with features such as default encryption and intrusion detection. Leveraging the platform’s capabilities, Valon can present a tamper-proof audit trail of all actions done by homeowners as well as servicers. The privacy-by-design technology infrastructure connects loan originators, servicers, lenders and payers and automates the requirements of servicing a mortgage including, but not limited to, disclosures, escrow, loss mitigation, and payoff.
With Fannie Mae approval, Valon can service agency-backed residential mortgages. The company has received commitments that will fuel its growth to an estimated $10 billion in servicing volumes in 2021. Valon operates in 49 states, and New York is expected to be added this year.
Founded in 2019, by Andrew Wang, Eric Chiang and Jon Hsu, Valon’s mission is to champion homeowners on their financial journey as the partner they trust with their home and their future. As a former investor in this asset class, Wang was frustrated by the lack of actual service provided by servicers and was unsatisfied with the dearth of options. Chiang and Hsu’s prior product and engineering experience at Google and Twilio, coupled with Andrew’s deep understanding of the complexities of the market, led to the development of the Valon platform which challenges the generations-old status quo.
"Valon has built a mobile first mortgage servicer from the ground up. Homeowners are faced with clumsy websites, call centers, and often misinformation. In Valon, they have a trusted software driven advisor who can provide clear, transparent, regulatory compliant information in good times and bad - without needing to pick up the phone," said Angela Strange, General Partner at Andreessen Horowitz who joined the Valon Board of Directors in mid-2020. “The Fannie Mae approval only serves as further validation of the platform the team has created - it meets regulations, and brings a step-function improvement for consumers, for mortgage originators and investors alike."
The capital raised will accelerate Valon’s growth through hiring and building out its operations for acquiring more Mortgage Servicing Rights (MSR).
Valon Mortgage is a Fannie Mae approved, tech-enabled residential mortgage servicer. The company’s mission is to champion homeowners on their financial journey as the partner they trust with their home and their future. Valon is licensed to service in 49 states, with New York expected to be added to the portfolio this year. For more information, visit: https://valon.com/.