Specialized servicing platform designed for efficiency
Valon, a fintech known for its residential mortgage servicing platform, is building a growing customer base by relying in part on an old-fashioned option: word of mouth.
“The [mortgage] servicing industry is very much a word-of-mouth industry,” said Valon co-founder and CEO Andrew Wang (pictured). “There are obviously large trade conferences, but for the most part, people go off and [build their business based on] recommendations of other peers, independent companies that have interfaced with you.”
Launched in 2019, Valon has raised roughly $90 million in venture capital to date, including a nearly $44-million round last November that attracted investment from investors both old and new. That money has been slated to help fuel the New York and Arizona-based company’s continued hiring, potential strategic acquisitions and the development of a loan originations and property insurance business. About 150 employees worked for the company as of mid-March.
Valon’s expansion centers around its platform, whose customers include big mortgage portfolio owners and originators such as asset managers, banks and credit unions. Valon’s platform interfaces directly with homeowners whose mortgages are owned by its customers.
Valon asserts that it stands out in the marketplace because it has built its technology from the ground up, contrasting with other mortgage servicers in the industry. The software is designed to be intuitive and help give borrowers a more customer-centric experience, with features including a self-service interface the company said is transparent, easy to access and backed by “expert customer service.”
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“That allows for us to have this transparency and flexibility that many other servicers do not have,” Wang said.
The company has certainly generated momentum. As part of its November venture capital financing announcement, Valon noted its 2021 accomplishments. Those gains included winning approval to service mortgages backed by Freddie Mac and FHA. There were also new and continued partnerships with NRZ, a publicly-traded mortgage real estate investment trust, Freedom Mortgage, Starwood Capital and Seneca Mortgage Servicing – a GSE-approved mortgage servicer.
Valon predicted at its November financing announcement that it would service more than $6 billion in mortgages and over 20,000 consumers by the end of 2021.
Wang previously has said he’s challenging the dominance of old-school mortgage services such as Black Knight.
Customer integration
Once a mortgage lender or bank sign a deal for Valon to be their servicer, initial integration steps are straightforward, according to Wang.
“Most of this is pretty standardized because it’s [regulated] by the government,” Wang said, particularly with FHA loans involved, “so you have a very specific set of requirements that you have to follow. Once you figure that out, there’s a pretty short process relative to the industry.”
Wang described a process of between one and two months of tasks including setting up the bank accounts and conducting interim testing to make sure servicing process work well. Clients also send Valon information about the loans they want Valon to start servicing.
“We’ll start servicing [the loan] once the information has been transferred and the applicable authorities have been notified,” Wang said.
The time it takes to upload can vary depending on the customer and regulations, Wang added.
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“In many cases you need to tell the applicable agency or authority that you are servicing on behalf of a new client,” Wang said. “That sort of process… to get registered, the process to get hold of these identification numbers – that takes two months” though the specific actions on their own can take much less time.
Typically, according to Wang, older servicers can take three to six months to sign up new clients. He said Valon stands out because of its modernity and approach to tech.
“We have better technology, which is something that people who don’t come from the industry can’t fully digest and internalize,” Wang explained. “We’re competing with extremely old legacy technology.”
Design efficiency
Valon’s system includes “elements of artificial intelligence.” Wang added, however, that the company works largely because it is designed as a unified platform. Individual tech elements are secondary, he said.
“It’s more about designing your systems in a modular and flexible way to accommodate for practical realities of services,” he said.
One example, he said, would be the notion that most servicers, when clients transfer to them, do not allow them to sign up for several days.
“That’s not a real way that any technology company [would work] today,” he said, adding that the process is much more immediate with a new technology company like Valon.
In other words, Valon’s technology is structured to be efficient, Wang said.
Wang said that building Valon’s technology from the ground up is expensive, but he said it beats out-of-the-box software systems because it is so specialized.
“It’s a very difficult industry to tackle,” Wang added.
