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Somewhere between escrow analysis, loss mitigation & exception queues, mortgage servicing apparently became v sexy. At least Silicon Valley thinks so!
In today’s edition of The Mortgage Scoop, Valon raises $150M at a $2.3B valuation & makes the case that boring mortgage infrastructure can be extremely attractive when there’s like, $200M of ARR attached to it. Plus, a senior mortgage exec argues the UAD 3.6 waiver didn’t solve an industry problem so much as expose a bigger one.
Also: a consumer direct lender w/ a very cool name has reportedly been acquired, UWM names its first CIO, bi-merge chatter is heating up ahead of MBA Annual & one mid-sized lender says ditching The Work Number will save $1M.
What's On Tap - Oct. 5
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Mortgage servicing is having a hot-girl summer 👙
A few months after shedding its subservicing operation, Valon raised a $150M Series D at a $2.3B valuation, a sign that Silicon Valley believes one of mortgage’s least glamorous corners is super hot.
In a Forbes story that dropped this morning touting the raise, a16z partner Angela Strange said that “mortgage is going to be the next sexy thing.”
“Think about the things we consider sexy now. Customer support is suddenly sexy. Why? Because we’ve made it AI and now everyone’s talking about it,” she said.
Blue-chip VC firms Ribbit Capital & a16z are backing the round, which Valon plans to use partly to poach the kind of engineers who might otherwise end up at OpenAI.
And there’s plenty for them to build. Six months after launching ValonOS, the company says it has contracted more than $200M of ARR, w/ roughly 1 in 6 U.S. mortgages set to eventually land on the platform. (They even publicly acknowledged for the first time that ServiceMac is a client, which I reported in December ‘25. Carrington & NewRez are also clients.)
I wrote earlier this year that Valon was emerging as the biggest threat to ICE’s MSP franchise. Servicing still runs on a Frankenstein stack of aging tech, bolt-ons & manual exception queues. Valon’s pitch is basically: kill the green screens, ditch the duct tape & rebuild the whole thing around modern workflows, automation & AI.
Now, is servicing actually sexy? Uhhh debatable, haha. But tens of millions of customers, insanely complicated edge cases, gigantic institutions, dense regulation & a core technology stack badly in need of modernization? That’s catnip for engineers & VCs.
Mortgage spent decades being too boring for Silicon Valley (great show btw), but IMO boring gets a lot sexier when there’s $200M of ARR attached to it. I’ll have more on Valon & the future of servicing tech in Wednesday’s edition for paid subscribers.
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Did UAD 3.6 expose mortgage’s accountability problem? 🕵♂️
Many are celebrating what is effectively a delay of the UAD 3.6 rollout. One senior mortgage exec I spoke to last week had a veeeeery different take on it. I asked him to share his contrarian thoughts w/ y’all. If you aren’t familiar, check out my breakdown here. - James Kleimann
The recent announcement of a voluntary waiver program for the UAD 3.6 effective date underscores a lingering problem in this industry. Some call it the telephone game. Some blame vendors. Some blame fragmentation. Whatever you call it, FHFA & the MBA intervened to protect companies who are unprepared for an effective date years in the making.
The industry is only as efficient as the slowest, unprepared members. The MBA exists to protect lenders so it makes sense MBA would not want any lender, even an unprepared one, to experience pain. Lenders, as it turns out, cannot trust some of the largest vendors or service providers to be ready. Anytime something like this happens finger pointing and blame is inevitable. Blame game feels unhelpful to anyone. At the same time, it should come as no surprise why new technology or new cost-saving companies do not survive our industry. We reward incumbents and we protect those that fail to invest. We do not create the ability for new data, new technology or new partnerships to help lenders help themselves. The legacy of all these UAD modernizations seems to follow the legacy of the industry. As much as we talk about things changing, they stay the same.
UAD did not create dysfunction and did not create the problem. UAD modernization exposed it. We have service providers, like appraisers, working off multiple different tools to do their job. We have intermediaries, like AMCs, that insert new platforms and reviews for QC or delivery of appraisals. Underneath both those participants are software companies building things for appraisers, AMCs and/or lenders to use. Lenders are left to interpret what is passed on to us and absorb the cost or pain of miscommunication or misapplied technology. None of the participants, including lenders, have the responsibility or authority to fix everything at the various layers.
Instead, this moment of UAD “flexibility” is also happening during an increasing rate environment and while everyone panics about AI. Lenders who are prepared or who are not in need of special waivers can still win.
1. We need to demand better proof. Show do not tell. Lenders do not have visibility or data we need. Lenders ask AMCs and appraisers to self-report who was ready. We got back words not actions, not data. There was no measure of readiness. Service providers and technology companies should demonstrate, not describe, capacity.
2. More time or increased appraisal fees are largely a compounding mistake. It may turn out that appraisers should have an increased fee. It needs to be because we have failed to reflect their value before this NOT because 3.6 “takes longer.” Aligned incentives and rethinking our process is more than vendor management. It’s real partnership to pass along value to a partner (like an appraiser) when responsibility and efficiency have also changed. This could be that moment for true collaboration and increased value and efficiency.
3. UAD modernization has changed more than appraisal reports because it allows for an updated operating model. The biggest pain points for lenders with appraisals over the last 5+ years has been control and scale. We are not allowed to control the process and appraisers have been the opposite of scaled. This has been the key for AMCs. This is also changing. If AMCs could not ensure a smooth implementation of 3.6 with a year to prepare, what assurance do we have that the next 5 years will be any improvement?
Lenders should use this moment to ask if the partner responsible for appraisal delivery actually has the authority, data, technology and relationships to deliver on the work.
The need for a waiver of the Nov. 2 implementation date exposes an important weakness in the existing model. Responsibility is distributed across lenders, AMCs, appraisers, and “technology” providers, while authority to fix problems belongs to no one. Accountability without authority is vendor management. Accountability with authority creates an operating system. The tools and technology exist now for visibility, transparency and readiness for this 3.6 go-live date but, more importantly, it is time for lenders to update our thinking and our operating model.
Quickies/ARMChair Critics 🚪
Andrew Deyo, a producing co-branch manager for Rate in Colorado Springs, has joined NEXA. And apparently, enough drama came out of that branch to fill a full season of Bravo. More TK on that in a future edition…
UWM appointed Vandy Fartaj as its first-ever chief investment officer. Fartaj spent many years at Pennymac & developed a reputation as a high-level “relationships guy,” sources said. He moved over to CCM in ‘24, but it didn’t quite go according to plan & he left not long after.
The rumor is that Bill Pulte will announce bi-merge at MBA Annual. I asked my sources in the credit space on Friday & most of them believe it’s going to happen.
John J. Owens of Primis Mortgage says his shop will save $1M & 20 jobs this year simply by saying goodbye to The Work Number…
ARMs account for more than 11% of rate locks, their largest share in nearly four years, per ICE. I am clear-to-close on a 10-year ARM at 5.375% w/ a big bank on my Brooklyn condo, paying one point. I locked it on Aug. 21. Were I to lock the same product today, the rate would be waaaaay higher.
Word on the street is that consumer direct mortgage shop RealGenius has been acquired…
I’ll be publishing an insider’s guide to MBA Annual in Chicago this week. I’ll also have special coverage for Mortgage Scoop Insiders throughout the conference. There will be scoops, of course. But I’ll also be asking the most important questions, like, Who, if anyone, got a CMBA tattoo on their lower back? How did the breakfast buffet stack up this year? Is deep dish a pizza or a pot pie w/ sauce & cheese? Did Halsey outdo Pink’s brief performance last year? Who had the best swag? The worst swag?
(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)