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*Q&A with Cloudvirga. Co-Founder Kyle Kamrooz Shares the Full Story of How This Company is on a Mission to Digitize Home Finance. Youthful Passion and Desire to Disrupt Are Strong Motivators.

Kyle Kamrooz, co-founder, Cloudvirga

SoCal’s median home price has hit a record high of $520,000, even with mortgage rates rising (see article here). And, subprime mortgage bonds are making a comeback (see article here). It’s against this backdrop that Cloudvirga announced on May 16 that it raised $50 million in a Series C round. (See related article here,

The raise validates the company’s goal of disrupting the mortgage industry by digitizing it. Though still a young company, Cloudvirga is quickly finding its footing as it tries to reduce the laborious time effort and high costs involved in closing a home loan, which typically takes a minimum of 40 days.

OC Startups Now periodically runs Q&As with key players in the OC startup/innovation ecosystem. This one is with Kyle Kamrooz, co-founder of Cloudvirga. Kamrooz is an evangelist for bringing the mortgage industry into the 21st century. He was recently asked to join the Forbes Finance Council, an invitation-only, fee-based organization for finance executives.

Here’s the lowdown on Kamrooz’s inspiration for starting Cloudvirga, along with his co-founders, and how they are working to streamline the home finance process. He also shares his desire to cast the mortgage industry as an enticing career path for young job-seekers.

OCSN: What inspired you to go into the mortgage business at age 19?

Kamrooz: I actually was on a path to do M&A advisement. I wanted to work on Wall Street. But my dad needed help starting his own mortgage company in Irvine and suggested I help him. That was in 1998.

I started with the mindset that I’d just try the mortgage industry for a little bit, but I stuck with it because I saw the flaws in the industry and recognized them as opportunities. The rest is history.

OCSN: What were the flaws you saw?

Kamrooz: I saw how much manual work was being done that didn’t have to be done. It was the late ’90s, so computers weren’t ubiquitous yet. Automation wasn’t as prominent.

OCSN: How did you meet the other co-founders of Cloudvirga?

Kamrooz: I’ve known Bill (Dallas) since I was 18. He was an adjunct professor teaching entrepreneurship at Pepperdine, where I got my degree. He became my mentor. I later met Mark (Attaway) through Bill. Mark had built mortgage tech before Cloudvirga. He helped automate the title insurance process at Fidelity National Title.

OCSN: What’s the story behind the company name?

Kamrooz: It’s a combination of “cloud,” which is a nod to our SaaS service mode (software-as-a-subscription), and “virga,” a little-known word that describes the streaks of rain that appear to hang under a cloud and evaporate before reaching the ground. The company’s goal is to make the traditionally expensive cost of getting a mortgage evaporate.

OCSN: When did you start building the platform?

Kamrooz: We started building our platform inside Skyline Home Loans back in 2015.

At first, we were just captive inside of Skyline. Then we realized we could serve a bigger purpose by leveraging our technology to help the whole industry. We had a couple of customers, and we had a lot of interest from other lenders who recognized that we’d built something really robust. So we spun out in early 2016 as our own company.

Now we’ve got some of the largest lenders in the country on our platform. (He declined to name who those lenders are.)

The mortgage industry is very complicated. Each transaction involves an incredible degree of minutiae. So being incubated inside a lender gave us a huge advantage.

OCSN: What inefficiencies did you see in the mortgage process that you wanted to eliminate?

Kamrooz: People see commercials for Rocket Mortgage (a consumer-direct lender that enables homebuyers to apply for a mortgage online) and assume that the whole process is now digital, online and mobile. In reality, only about 1% of what it takes to actually complete a mortgage is as digital as it could be.

We want to digitize the process, not just the application. It takes a borrower 20 minutes to complete an application, but it still takes at least 39 days to close the loan. We focus on what happens during the rest of that time.

In the early 2000s, a lender’s production expenses per loan — which typically get passed on to the borrower in rates or fees — added up to about $3,000. Today, it’s closer to $9,000. Some of that cost comes from tighter lending regulations and the associated cost of compliance, but a lot of it is due to inefficiency.

The problem is you’ve got hordes of people involved in closing every loan, and they’re all dealing with old school ways of doing things that are very archaic. We’re in a digital world, but mortgage is still analog.

OCSN: Why has the mortgage industry been so slow to adapt to digitization?

Kamrooz: Because the legacy systems are entrenched — and because of the demographics of the mortgage industry as a whole. The average employee is age 50-plus. And, in many cases, they’ve been doing this work for decades, with little change. A lack of fresh perspective has really slowed the industry’s evolution.

But younger generations haven’t historically viewed going into the mortgage industry as cool or hip. I want millennials and Gen Y college grads to view a job in the mortgage industry as being as cool as working for Netflix.

OCSN: How are you helping to achieve that?

Kamrooz: We’ll be working with local universities (including my alma mater, Pepperdine) to help students study mortgage and finance as a path to building a lasting career, while helping consumers with the largest financial transaction they’ll ever undertake – a home purchase.

OCSN: Have you used Cloudvirga to buy your own homes?

Kamrooz: I’ve bought about half a dozen homes. I haven’t used Cloudvirga to do it — the transactions either happened before we created Cloudvirga, or with a bank that’s not one of our customers. But each home purchase experience reinforced the opportunity that exists to disrupt this market. 

OCSN: What are your thoughts in general about OC’s startup ecosystem?

Kamrooz: Our startup ecosystem is still in its infancy. That’s something I want to start helping with. It can be hard to find certain talent, like seasoned software developers, here in OC. That’s something we need to change.

OCSN: How do you change that?

Kamrooz: By becoming successful, we can help this ecosystem grow and drive more fin-tech here. We’re trying to change the process for the largest financial transaction people can make, and we’re doing it right here in OC. Some other companies are tackling car finance (i.e. AutoGravity) and personal finance (i.e. Acorns), but no one is tackling the massively complicated gorilla in the room: home finance.

OCSN: How do you stay ahead of the competition?

Kamrooz: There are some Silicon Valley darlings that got a lot of funding but don’t have a deep understanding of the mortgage process. They’re casting a wide net to attract consumers, with many bells and whistles that float on the surface. We’re not just going wide, we’re going deep to fix inefficiencies that lie at the center of the mortgage process.

Bottom line: we want to solve the cost-to-originate problem for lenders. When you solve that, then by extension, you also solve the massive inefficiency problem for consumers.

It will take much more than just giving consumers the ability to apply for a mortgage on a mobile device. These “shiny objects” are just table stakes — they are  capabilities that every 21st century lender has or should have. Solving the cost problem is much bigger.

(Kamrooz opined on this very subject in a November 2017 article for National Mortgage News, see here).

OCSN: What’s next?

Kamrooz: Right now, our goal is to just keep growing. Our latest funding allows us to scale the business. We’re already heavy in development, with close to 150 employees around the nation. Most of them are in Irvine. So next, we’ll be rounding out the rest of the organization to leverage what we’ve built. We have the most robust digital mortgage point-of-sale platform in the industry, by a mile. Now we need to promote it.

OCSN: What is your goal of being on the Forbes Finance Council?

Kamrooz: I want to bring awareness of the mortgage cost problem to more people. We consumers have to make sure that lenders are pushed to really solve the cost problem, because it will benefit all of us in the long run.

About The Author

Deirdre Newman is a long-time journalist, who's covered OC startups for a few years.

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