Rash of private equity deals reinforces investor interest in mortgages

March 26, 2021 2:21 PM

The private equity markets are going big on the mortgage business. In the past week alone, five funding announcements regarding real estate finance-related businesses demonstrated that investors are pouring tens of millions, hundreds of millions and even billions into them. If all goes well, these companies could one day go public — as was speculated after Better.com's last funding round.

Here is a look at the five transactions:

Seven credit unions join LenderClose's latest round

Company: LenderClose
Round: Series B
Size: $10 billion
Investors: Next Level Ventures; Ardent Credit Union; Strata Credit Union; Tucson Federal Credit Union; Collins Community Credit Union; Financial Plus Credit Union; Serve Credit Union; and Ascentra Credit Union

This is LenderClose's fourth round, including a seed round and a corporate round, but this is its largest single raise by far. The company has raised a total of $11.3 billion, according to Crunchbase.

Next Level put $1.3 billion into the Series A round, while Ascentra CU was the sole participant in the corporate round.

"We have seen LenderClose grow faster than most fintechs in the industry have grown," said Dave Tucker, partner at Next Level Ventures in a press release. "The group has been able to accomplish so much with very little, since the Series A in March of 2018."

The home equity and real estate lending technology provider has more than 300 credit unions and community banks as clients. It expects to nearly double its staff by the end of this year and do the same for its client base by the end of 2022.

Commercial mortgage marketplace Lev adds $10M

Company: Lev
Round: Seed
Size: $10 million
Investors: NFX (lead investor); Caanan Partners; JLL Spark; Animo Ventures; and Ludlow Ventures

Lev has completed four seed rounds and a venture round that has raised $14.8 million. Amino Ventures led two of the previous seed rounds and Ludlow Ventures the other.

The company helps commercial real estate investors find financing using a combination of machine-learning, custom software and its commercial real estate expertise.

It has closed over $100 million in commercial real estate finance transactions over the last 12 months and is on track to do nearly 10 times that volume this year.

"Lev is transforming commercial real estate financing in ways that are similar to what LoopNet did to property marketing and discovery 20 years ago," said Rich Boyle, general partner at Canaan Partners and the former CEO of LoopNet in a press release. "They are applying technology to bring transparency and efficiency to a massive market for the benefit of both borrowers and lenders in the CRE space."

The Mortgage Collaborative's venture fund makes its first investment

Company: Maxwell
Round: Series B
Size: $16.3 million
Investors: Fin VC (co-lead investor); TTV Capital (co-lead investor); Rotor Capital; The Mortgage Collaborative Emerging Technology Fund; Anthemis Group; Route 66 Ventures; and Sovereign's Capital

Through pre-seed, seed and Series A funding rounds, Maxwell, which offers mortgage loan fulfillment technology, had raised $10.6 million, according to Crunchbase.

"From our investments in SoFi and Figure, we've seen first-hand the impact modern industry leading technology capabilities and innovative business models can have on complex markets that are eager for change," Peter Ackerson, general partner at Fin VC, said in the Maxwell press release. "As Maxwell continues to grow at a breakneck pace, they’ll continue to lead the innovation roadmap for the community lenders in their network, whether they do $50 million or $5 billion a year."

This is the first investment made by the TMC Emerging Technology Fund, whose contributors include several members of The Mortgage Collaborative.

"What I find so unique about being a limited partner in TMC's Emerging Tech Fund is the opportunity to control my own investment dollars," said Owen Lee, the co-owner of Success Mortgage Partners in a separate Mortgage Collaborative press release. "Maybe more importantly, since the future-state of the mortgage industry will include more technology and not less, this role helps me stay educated and prepared as a business operator for what is coming next in our industry."

The Maxwell deal puts the TMC Fund "on the map and creates the strategic context for our deal pipeline well into 2021," said Sandy Selman of Asia West, which provides management services for the fund.

Founded in 2016, Maxwell has facilitated over $100 billion in loan volume to-date through its platform. In 2020, the company grew its team to over 200 employees and surpassed $6 billion in monthly loan volume on its platform.

Rebranded product and pricing engine Polly adds new capital

Company: Polly
Round: Series A
Size: $15 million
Investors: 8VC (lead); Menlo Ventures; Conversion Capital; Meritech Capital; Fifth Wall; and Base10 Partners

This is a second Series A round for Polly, which previously received $5 million from six investors in a 2019 capital raise, including Meritech Capital, Fifth Wall and Base10 Partners, according to Crunchbase.

On March 18, the company, formerly known as PollyEx, dropped the last two letters from its brand. "Since launching the loan trading exchange, we have continued to create innovative products and services for the mortgage capital markets such as our PPE," said CEO Adam Carmel in the March 18 press release. "I believe now is the appropriate time to rebrand our company by 'dropping the Ex' to reflect Polly's broad suite of products and services that benefit mortgage lenders from rate lock all the way to loan delivery."

Notarize's latest round more than doubles its total capital raised

Company: Notarize
Round: Series D
Size: $130 million
Investors: Canapi Ventures (lead); CapitalG; Citi Ventures; Wells Fargo; True Bridge Partners and existing investors Camber Creek, Ludlow Ventures, NAR’s Second Century Ventures, and Fifth Wall Ventures

This is Notarize's third raise in three years, and by far the biggest. In March 2020, it added $35 million, while in April 2019, the company raised $36.5 million.

All told, it has undergone nine rounds, bringing in more than $213 million. Among the new investors are Canapi Ventures, CapitalG (Alphabet's independent growth fund), Citi Ventures, Wells Fargo and True Bridge Partners. They join existing investors Camber Creek, Ludlow Ventures, NAR's Second Century Ventures, and Fifth Wall Ventures.

Notarize's business ballooned in 2020, not just in real estate but across other areas that rely on signed documents. "Notarize was there to help them safely close these deals with trust and convenience," said Pat Kinsel, CEO of Notarize. "We're now working with market leaders across countless industries and have proven that our platform transforms how companies operate in the digital age."

Since March 2020, Notarize has seen over 800% growth in the real estate sector, 300% growth in financial services, 200% growth in automotive, and nearly 300% growth with retail and consumer customers.

"Over the past year, the market for remote online notarizations has grown explosively as businesses across sectors have grasped the critical need for end-to-end digital processes," said Jesse Wedler, partner at CapitalG, said in the press release. "While COVID was an initial catalyst for adoption, we are seeing an acceleration of demand driven by process efficiency gains and compliance improvements made possible by remote online notarization."