Valon raises $150 million to put AI agents to work on 1 in 6 US mortgages

Ribbit Capital joined as a new investor. Existing investors, including Andreessen Horowitz, also took part.

"A mortgage is the biggest bill most families will ever have, yet the companies that service those loans still rely on complex, hard-to-navigate legacy software," said Micky Malka, Ribbit Capital's founder.

Angela Strange, a general partner at Andreessen Horowitz, said her firm has backed Valon from the start "and have come back in every round since." She said Valon "has built the operating system for a $13 trillion mortgage market."

Valon builds software for mortgage servicing, the work of managing a home loan after it's made.

A servicer handles the borrower for the life of the loan, which can run 15 to 30 years, TechCrunch reported when Valon raised its Series A in 2021. That includes collecting payments on behalf of the lender and helping borrowers when they run into trouble.

The problem, in Valon's words: "For sixty years, mortgage servicing has run on aging mainframe systems, and every regulatory change has compounded technical debt and increased costs," said Andrew Wang, Valon's co-founder and CEO.

The fix: ValonOS, which the company calls an operating system for regulated finance. It replaces a servicer's patchwork of systems with one platform for:

• Loan data
• Investor reporting
• Operational workflows
• Compliance rules
• Money movement

Valon runs AI agents on top of ValonOS. They take on servicing work such as:

• Answering homeowner emails
• Allocating payments
• Running escrow analyses

The platform gives agents one source of truth with detailed context, tools they can call, and an audit trail for everything they do, according to Valon.

Linda Du, Valon's co-founder and president, argues that the hard part isn't how smart the AI is. "The bottleneck for deploying AI agents into regulated industries is context, not intelligence," she said.

Agents in mortgage servicing need three things to be effective and safe, Du said: structured servicing data, records of how past decisions were made, and the ability to carry out predictable, rule-based actions.

Valon says one in six outstanding US mortgages is now under contract to run on ValonOS.

Fast sales: within six months of offering ValonOS to the wider industry, Valon signed more than $200 million in contracted annual recurring revenue.

Big customers: ValonOS will power some of the country's largest mortgage institutions, including:

• Rithm Capital's Newrez
• Carrington Mortgage Services
• ServiceMac

Two of the 10 largest US servicers are already live on it. ServiceMac is the fourth-largest residential subservicer. Carrington acquired Valon's own servicing business in August and adopted ValonOS as its core platform.

"Replacing core servicing technology is a significant decision, and not one ServiceMac took lightly," said Rod Hatfield, ServiceMac's chief operating officer.

Hatfield, who has more than 30 years in the industry, said Valon's capabilities help ServiceMac's teams "work more effectively, manage risk, meet compliance requirements and deliver the service and accuracy our clients expect."

Wang framed the round as a turning point for the whole industry. "ValonOS is the operating system the industry is moving onto," he said, "and this financing lets us bring it, and the AI agents that run on it, to every servicer in the country."

Valon took an unusual path. Instead of selling software straight to the industry, it first built and ran a full-scale, licensed servicing business on its own platform.

"You have to service the loans yourself and prove the system holds up at real scale," Ribbit's Malka said.

Du said that six years of running a servicer gave Valon a detailed model of "how mortgage servicing actually works."

Valon was founded in June 2019 by Andrew Wang, Eric Chiang and Jon Hsu, TechCrunch reported in 2021. Chiang and Hsu brought product and engineering experience from Google and Twilio. Wang was a former investor in mortgage servicing who was frustrated by "the lack of service" from existing servicers.

The early pitch: Valon set out to break what it called "a monopoly in the market." At the time, it said the largest mortgage servicing software company, Black Knight, controlled more than half of all US residential loans.

Wang told TechCrunch then that this "stranglehold" had driven servicing costs up nearly 250% over a decade, with the fees passed on to borrowers. Valon claimed its approach could cut servicing costs by up to 50%.

Early funding: Valon raised $3.2 million from seed investors including Alley Corp, then a $50 million Series A led by Andreessen Horowitz in 2021. At that point it described itself as a tech-enabled mortgage servicer and had just won approval from Fannie Mae to service its loans.

Fast growth even then: Wang said Valon had gone from no contracts to $10 billion in mortgages committed to be serviced in a single year. The pandemic, when millions of Americans stopped paying their mortgages and requested forbearance, "greatly accelerated the need for a new-age mortgage servicer," he said at the time.

Five years later, Valon has sold its own servicing business to Carrington and turned the platform it built into a product for the whole industry.

Most figures in Monday's announcement come from Valon itself. The one-in-six reach, the $200 million in contracted revenue and the valuation haven't been independently verified.

FourWeekMBA notes the release doesn't name a lead investor for the round. Valon also hasn't shared data on how its AI agents perform for homeowners, such as response times or error rates.

Valon says the funding will:

• Speed up product development.
• Move the largest servicers off legacy systems and onto ValonOS and its AI agents.
• Grow its teams across engineering, product, deployment and sales, in New York, San Francisco and remotely.

Valon plans to expand into other kinds of regulated lending over time. It says commercial, personal, auto and student loans share many of the same challenges, including high transaction volumes and strict rules.

"Servicing is the hardest, but also the stickiest, way to enter one of the largest debt markets in America," a16z's Strange said. "You have to turn regulation into code, get multiple licenses, and earn the trust of the biggest asset managers in the country."

• If you have a mortgage: there's a decent chance the company handling your loan will run on ValonOS, given its one-in-six reach.
• Faster answers, maybe: AI agents answering emails and handling payments could speed up service, though Valon hasn't shared results for homeowners.
• Watch other loans: auto, student and personal loans could be next.