Five-year-old Cloudvirga—whose software automates the mortgage process for lenders and borrowers alike, saving time and money and also cutting back on paperwork—on May 25 said it was being acquired by Houston-based Stewart (NYSE: STC), one of the four largest title insurance companies in the country.
The $1.7 billion-valued company competes with Santa Ana-based First American Financial Corp. (NYSE: FAF) and others in an industry that’s increasingly looking at new technologies to diversify its business lines and improve profitability in a sector whose fortunes are largely tied to interest rates.
Title insurers’ main business is to write policies protecting buyers of homes and other real estate from claims contesting ownership. Stewart’s varied services are offered to homebuyers and sellers, mortgage lenders and servicers, title agencies, homebuilders and others in the real estate world.
Stewart said the purchase is primarily designed to strengthen its position in the mortgage finance sector.
“They’re very forward thinking,” Kamrooz said of Stewart, speaking to the Business Journal on May 29.
“They really want to strengthen and get into this digital mortgage ecosystem.”
Terms of the deal were not immediately disclosed. Stewart reportedly spent some $200 million of cash on acquisitions last year.
“As Stewart accelerates, we continue to invest,” Fred Eppinger, the title company’s CEO, told analysts at the end of March during its latest earnings call when discussing tech-related purchases. “We’re always looking at connectivity and the efficiency [at] the front end of the process, and we’re going to continue to do that.”
Kamrooz said that he’ll be staying on as chief executive of Cloudvirga and that the company will keep its Orange County headquarters. “We’ll be a wholly owned subsidiary,” he said.
The Cloudvirga name also will be kept. It has “great name brand recognition in the industry,” he says.
$77M in Funding
It’s been a quick rise for Cloudvirga, which has raised more than $77 million from investors since its 2016 founding.
Cloudvirga’s technology powers nearly $100 billion in loans annually, and is used by 10 of the country’s top 40 mortgage originators, according to the company’s website.
“Several of the largest lenders in the country rely on Cloudvirga as their digital front-end solution,” Stewart noted in announcing the acquisition.
The company’s software increases transparency during the lending process, as consumers can access and manage their loan from any device using data connections and instead of paperwork.
The company told the Business Journal in January that revenue doubled in 2020, though specific sales figures weren’t disclosed. Kamrooz says he expects more than 30% top-line growth in 2021 over last year, spurred on by millennials and other first-time homebuyers. Kamrooz was awarded a Business Journal Innovator of the Year Award in 2018 for his work in launching Cloudvirga.
As growth was picking up, the company reached a crossroads by the end of last year, prompting Kamrooz to consider options including raising more capital or finding a strategic partner.
Cloudvirga last December hired Los Angeles-based investment bank Houlihan Lokey to evaluate options going forward—“do we want to raise more capital, do we want to get a strategic partner, do we want to go ahead and go ahead on acquisitions,” according to Kamrooz.
“We went through the process, and we had a lot of interest, and we ended up with Stewart Title as the right one from a synergy perspective.”
“It really is a perfect fit,” said Kamrooz of the partnership with Stewart.
Local hiring continues for the firm, which counts more than 100 area workers.
“We’re going out and hiring for several key positions,” Kamrooz said. Cloudvirga was advertising for six open jobs as of last week, all of them in Irvine. The openings included senior product manager, application support engineer and senior software engineer.
Stewart counts about 5,800 employees. It’s a “massive partner,” Kamrooz said.
“Having the backing of an industry leader like Stewart will allow us to increase value to our customers as we streamline and accelerate the origination process,” Kamrooz said.
He said that Cloudvirga will soon be introducing a new product, a wholesale lending channel for mortgage brokers.
“By bringing Cloudvirga’s capabilities and solutions to the Stewart family, we further demonstrate our commitment to creating an industry-leading platform for customers to drive ease-of-use throughout the real estate transaction,” Eppinger said at the time of the acquisition.
Eppinger said that Cloudvirga’s platform “will accelerate our digital offerings in all markets, complement our existing capabilities and enhance our ability to provide customers with end-to-end mortgage services and solutions.”