Mortgage subservicer Valon gets Ginnie Mae issuer approval

Subservicing fintech Valon Mortgage received approval as a Ginnie Mae issuer, another in a line of key developments for the growing firm.

After prior approvals from Fannie Mae and Freddie Mac as well as government-backed lending agencies, the latest news puts Valon in a position to serve a larger share of the mortgage market and drive future growth, the company said. Ginnie Mae guarantees mortgage-backed securities from loans backed by federal programs.

"This approval from Ginnie Mae is a significant milestone and important step forward for Valon," said President Michael Zochowski. "It enables us to serve more homeowners and broaden our partnerships across the mortgage ecosystem in furtherance of our mission to empower every homeowner."

The latest announcement comes following a $100 million Series C raise for the New York-based fintech in October. At the time, the company said it would use the funding to accelerate product development and increase market share. The company services loans with proprietary in-house software. 

Founded in 2019, New York-based Valon has raised $230 million in venture capital funding and said it is already a top 15 mortgage subservicer. 

Following a slower period for VC funding of mortgage technology relative to 2020 to 2022, home finance fintechs have seen some investor interest return in the latter half of 2024, with funding announcements recently coming from the likes of Polly, shared appreciation platform Splitero and title-verification firm Flueid. 

The new approval for Valon also arrives weeks before the introduction of a new Ginnie Mae capital risk-based requirement establishing liquidity thresholds nonbanks must maintain to be issuers. The new rule is set to go into effect at the end of the year. 

To receive approval, Valon said it demonstrated it had sufficient "organizational, financial, procedural, quality control, and other necessary characteristics" in place to qualify.  

In a recent discussion at the Mortgage Bankers Association conference in October, Ginnie Mae Chief Risk Officer Gregory Keith said he saw few problems with the upcoming implementation, which was delayed by a year after some issuers raised concerns about noncompliance. Among its requirements, the rule requires nonbank issuers to maintain a minimum capital ratio of 6% with risk weight of 250% for mortgage servicing rights.

At the conference, Keith also hinted that Ginnie Mae would consider offering capital relief to nonbank issuers demonstrating they could effectively manage interest-rate risk, an incentive it formally confirmed in November.