As we and many others foreshadowed at the beginning of this year, the drive for innovation continues to propel M&A in MortgageTech. Investments in technology have dominated deal activity. Investors see opportunity in accelerating the burgeoning digital trends in the mortgage space. The success of these bets is tied to the importance of analytics, workflow and disruptive new technologies such as AI and blockchain.
We expect more activity consistent with ongoing themes:
Consolidation along the value chain to build scale;
Automation, including AI applications to modernize processes; and
Potentially disruptive changes to the industry model as mobility and digital innovations such as blockchain begin to take hold.
1. Consolidation
Trend Insight – Scale Still Matters
Rising regulatory costs combined with a sluggish home financing market is fueling an environment ripe for consolidation as incumbents look to strengthen their positions and smaller players try to catch up
The leading companies are acquiring technology to drive down costs and automate in all areas of the mortgage value-chain from origination to underwriting to servicing
Notable Transactions
In August, Pro Teck acquired Direct Valuation Solutions to add complimentary customers and scale to its AMC
In April 2018, Fidelity National Financial (NYSE: FNF) announced a $1.2 billion cash and stock offer to consolidate a Title and Services competitor, Stewart Title (NYSE: STC), potentially raising its title insurance market share to above 40%
2. Automation
Trend Insight – Driving Out Mortgage Inefficiencies
Mortgage underwriting is a slow, tedious and multi-party process that is in the cross-hairs of investments in innovation and streamlined workflows. Automation through AI and machine-learning could accelerate a multi-day process down to a matter of hours
Notable Transaction
June 2018 – Black Knight acquired HeavyWater, an AI and machine-learning company that mimics cognitive thinking and conclusion-making, to add this capability to their LoanSphere solution
3. Blockchain
Trend Insight – New Disruptor
Blockchain technology has many potential applications in the mortgage chain. Banks and other loan providers benefit from full transparency and an immutable ledger, thus driving down the cost of due diligence, reducing errors in the chain of financing and valuation
Notable Transaction
May 2018 – R3 raised a $122mm funding round led by Bank of America, HSBC and dozens of other banks
R3 is led by a group of banks working together to create a blockchain-based distributed ledger technology
DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.
