Valon just raised $50 million to tackle the traditional mortgage-servicing industry. The deal was led by venture capital powerhouse Andreessen Horowitz, while WeWork Founder Adam Neumann was in on the deal as well. Neumann has been active in the proptech space as an investor, recently backing Alfred, a concierge service for multifamily properties.
The mortgage-servicing industry
Generally when you buy a property, the loan is serviced by a third party. This loan servicer is responsible for collecting monthly mortgage and escrow payments, among other things, such as collection and disbursement of taxes and filing monthly reports. The lender pays a fee for all of this administrative work as opposed to doing it in house.
In exchange for performing these activities, the servicer generally receives predetermined servicing fees and other sources of income, such as late charges. With so many parties involved, all driven by different factors, increased transparency in the industry is welcome from borrowers.
According to the Valon founders, a firm called Black Knight (NYSE: BKI) controls more than half of all U.S. residential loans. Valor’s CEO said, "This stranglehold has driven servicing costs up nearly 250% in the past decade, and the fees are passed on directly to the borrower."
Valon is working on challenging the status quo to allow for a more efficient process with far greater transparency in order to pass savings onto homeowners.
The company says that it has commitments from servicers that will lead to an estimated $10 billion in servicing volume in 2021. Valon is currently in every state except New York, which is expected to come on board this year.