If you’ve ever taken out a mortgage, you know how painful and tedious the process can be.
In an effort to make it simpler, faster and cheaper, a few former Blend employees have teamed up to build mortgage lending software that connects banks, credit unions, mortgage lenders and brokers. In other words, they want to make it easier for financial institutions to make the entire credit process easier and more transparent for customers.
The sheer volume of lending is a testament to the need for more efficient lending systems (LOS). For example, the Association of Mortgage Bankers predictions there will be more than $2.59 trillion in loans by 2022. a lot of loans. It is well known that inefficiencies in the process are rampant, leading to, among other things, longer closing times and higher associated fees.
During their time at Blend — a ten-year-old publicly traded company whose white label technology powers mortgage applications on banks’ site — Mike Yu and Devon Yang realized that today’s mortgage infrastructure has not kept up with the pace of change in more digitally native industries. This is a common refrain in the industry, which is why we see an increasing number of startups appearing in the space. For example, Polly announced this week that it has raised $37 million in a round led by Menlo Ventures to… automate workflows for mortgage companies.
And today, Yu and Yang’s new company, based in San Francisco Vesta, announces that it has been raised $30 million in Series A financing led by Andreessen Horowitz (a16z) with participation from new investor Zigg Capital. Existing backers Conversion Capital and Bain Capital Ventures also participated in the round, bringing the total amount the company has raised since its inception in November 2020 to $35 million. In a nutshell, Vesta’s technology aims to provide a customizable platform for taking out mortgages, supporting approval, underwriting, and closing and financing home loans.
General partner of A16z, Angela Strange, believes the mortgage industry still lacks a “consistent engine” to orchestrate and standardize loan origination.
“It’s as much about change management as it is about anything else, because replacing the existing process is difficult. It requires the technical and financial know-how to develop and implement a new backbone in a highly regulated industry,” said Strange, who joined Vesta’s board of directors as part of the funding. “All players – banks, brokers and title agents – agree that a new system is needed, but to date no one has successfully built it. Vesta’s team understand the depth of the problem and are technically adept at solving it. The infrastructure they create will be a major driver for automation and adoption in the industry.”
Yang was Blend’s first technical employee and led all platforms and integrations for that company. Yu was heavily involved in the company’s product launches, including the installation of Blend with Wells Fargo.
With their new capital, the duo hope to continue their mission “to enable financial institutions and their customers a seamless, transparent experience through an intelligent, quirky and intuitive workflow platform.” Some of that includes “aggressive” hiring plans — particularly in engineering and product development — and an emphasis on the go-to-market strategy.
Vesta says its SaaS model is accelerating the lending process with a platform designed to eliminate layoffs, reduce compliance risks and help lenders better understand, measure and improve their origination processes. That includes the purpose of serving as a system for recording loan origination data and documents, a customizable workflow engine that orchestrates the creation process between the various parties involved, and open APIs and an ecosystem so that lenders can inform their partners. choose whether to build their own point solutions. .
In fact, Yu says the company’s biggest differentiator is its focus on only be the core platform and provide developer tools and APIs to allow other point solutions (such as the aforementioned Polly) to integrate “seamlessly with the system of registration”.
“This is very much at odds with the incumbents,” Yu told TechCrunch. “We envision the future of mortgage infrastructure, and financial services infrastructure in general, as a modular ecosystem where lenders and banks choose the different point solutions that are best for their use and seamlessly combine them.”
Christian Lawless, managing partner at Conversion Capital, called the challenge Vesta is taking on a “huge, non-obvious” opportunity in a “highly fragmented” industry.
“Historically, much of the mortgage market has been built on outdated technology from the 1980s, which has slowed progress, hindered innovation, access to affordable rates and stifled competition,” he wrote via email. “While modern innovation in other sectors favors unbundling and open architecture, this is not the case with the current mortgage process. It’s long and painful, burdened by outdated technologies and highly manual operations built to keep customers with high break fees and expensive integrations. This has led to a growing gap between the modern, digitally native mortgage companies with more efficient and profitable workflow engines, and their aging peers who continue to lose market share.”