As fintech and proptech investors, Canvas Ventures has been paying close attention to the impact that COVID-19 has had on the mortgage industry. 2020 saw forbearance and loss mitigation requests in record numbers, with the delinquency rate of FHA loans reaching an all-time high of 15.6% in 2020. The last time this happened was in 2010, and it preceded an epidemic of foreclosures. For borrowers in delinquency, getting the help and forbearance they need to avoid foreclosure is a time-sensitive and often overwhelming process complicated by frequently changing regulation and a dependence on paper-based processes.
Evan Hatch and I are proud to share that Canvas Ventures is leading Brace‘s $15.7M Series B. Eric Rachmel of Brace is transforming the mortgage industry with a digital servicing and workflow automation platform. Starting with loss mitigation and default, Brace is developing a full suite of digital solutions to progressively unbundle and improve mortgage servicing core infrastructure.
With prior investments such as Lending Club and Possible Finance, we’ve had a long-held thesis around the modernization of lending, and Brace is leading the way in extending this modernization to what has been a seriously overlooked layer of the tech stack.
Modernizing mortgage software is one of the largest opportunities within fintech
It goes without saying 2020 that was a major year for fintech. Underlying the continued digital transformation of banking has been a corresponding evolution of the back office and infrastructure software powering financial services. As far as exits, 2020 was a major year for lending and mortgage origination software— between Ellie Mae, nCino, and Optimal Blue, there was ~$20B in liquidity realized. This isn’t surprising when one considers that residential real estate is the world’s largest asset class, a theme we’ve also invested behind with proptech deals like Roofstock and Flyhomes.
And yet, origination is just one part of the mortgage value chain. Equally important are the servicers who manage the administration and repayment of a loan over a multi-year lifecycle. The workflows of these servicers are often highly manual and dependent on pen and paper. Other than legacy core systems like Black Knight and Sagent, software to automate and modernize mortgage servicing has been almost non-existent.
Delinquencies from COVID-19 have the potential to push current infrastructure to the breaking point once forbearance ends, and banks and servicers are already in search of solutions.
A novel approach and best-in-class product
To solve these problems, Brace has built a modular, cloud-first platform to accelerate the human workflows within servicers and provide a digital, self-service experience for borrowers. In some ways, Brace’s product recalls those of RPA providers like UIPath, but is tailor-made for the specific needs of mortgage servicers.
Using a robust no-code engine, Brace is able to digitize and automate complex and divergent business logic with a dizzying amount of edge cases. It also can rapidly adapt to the challenges presented by a rapidly changing regulatory environment. With a microservices architecture and API-forward design, Brace’s platform also brings interoperability to a historically ‘siloed’ space dependent on on-premise systems.
Since our first conversation in late 2019, Brace has made incredible strides, signing contracts with some of the country’s largest servicers and continuing to expand the scope of their product. They have demonstrated an ability to drive digital transformation within mature companies and serve the often dissimilar needs of banks, non-bank servicers and specialty servicers alike. They also have secured a No-Action Letter from the Consumer Financial Protection Bureau, an important marker of regulatory approval.
A truly exceptional team
Eric and team exemplify the qualities we value in founders—humility, hunger, and domain expertise—especially within vertical SaaS and Fintech. The team’s comprehensive understanding of the servicing domain has allowed them to drive digital transformation within a mature industry and build trust with some of the industry’s most well regarded servicers. It is rare to find a team capable of moving as quickly as they have while at the same time navigating a particularly complex regulatory environment.
Sitting uniquely at the intersection of fintech, proptech, and enterprise software, Brace was a perfect fit for Canvas’ overlapping thesis areas. We are proud to partner with Eric and the Brace team, as well as existing investors including Point72 Ventures, Crosslink Capital, and Clocktower Technology Ventures. Brace is just getting started, and we can’t wait to help them along their important journey.
And, if you're interested in getting involved, Brace is hiring!