Digital mortgage-servicing platform Brace has snagged $15.7 million in a Series B funding round, the company revealed on Tuesday. The round closed just 10 months after its Series A funding in February, which brings the three-year-old startup’s funding total to just over $30 million.
The company’s Series B was led primarily by Canvas Ventures, a San Francisco-based venture capital firm that had previously invested in real estate startup Flyhomes in 2019, as well as real estate investment marketplace Roofstock.
Brace aims to create digital solutions to service non-performing loans – taking borrower-provided information, servicer system data and proprietary investor waterfalls to assist in loss mitigation decisions. Its borrower and servicer platform essentially sit “side-by-side” to perform a full loop of collecting information while rendering solutions.
CEO and founder Eric Rachmel said the latest funding will be divvied between further expanding their downstream and loss mitigation products as well as adding headcount in several departments.
Currently, the company is bi-coastal – operating in Los Angeles, with an engineering and product branch in New York City – though looking to expand.
Digital mortgage isn’t a marketing strategy anymore; the reliance on technology has become critical due to COVID-19 and health risks.
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Aside from their standard default services, Rachmel told HousingWire they also intend to finance different products offerings outside of loss mitigation. Though he wouldn’t go into detail, Rachmel noted the company envisions an end-to-end servicing system. That would seem to dovetail with the numerous end-to-end origination platforms companies have been racing to capitalize on.
It’s an interesting time for servicers. With 2.7 million homeowners in some form of forbearance plan due to the pandemic, servicers are already working overtime to help forbearance exits, and keep borrowers away from the aspect of foreclosure. For some, that’s still over 5% of their servicing portfolio.
“An enormous amount of value is locked inside legacy core systems, and in this past year the COVID-19 crisis has been a catalyst for speeding up innovation in servicing,” Rachmel said. “There are going to be a huge uptick in folks that need to figure out how to render and permit decisions for these borrowers.”
He continued: “We saw what happened with the last recession, with the fines that came down, and we want to make sure that those don’t come down this time. COVID is a unique situation, it’s different than the ’09 crash, this is unexpected so we have to work to get borrowers back on track.”
As for their leading investor, Rachmel said it plans to bring on Canvas Ventures co-founder and general partner Rebecca Lynn to the board to navigate the world that is “RegTech.” Lynn has over 20 years of experience in fintech operating and investing. According to Rachmel, she was a natural fit to help build tech around the GSE and non-GSE world.
“Brace has been able to successfully navigate a highly complex and regulated environment while building trust with large, well-regarded mortgage servicers. We are proud to partner with a team that is steadfast with their laser focus approach to disruption through best-in-class software,” Lynn said in a release.
Crosslink Capital also joined the list of investors this round, having previously contributed to the $10 million Series A funding Brace received in February. That round was led by led by Point72 Ventures, a venture capital firm that’s an offshoot of Steve Cohen’s Point72 and that had previously invested in housing startups Roostify.
In 2019, Brace, alongside Home Captain and boost.ai, were also the first to complete Flagstar Bank’s MortgageTech Accelerator program.