This Seattle startup uses AI to help mortgage lenders compete with industry giants

Mortgage giants such as Rocket and United Wholesale Mortgage have thousands of employees and technical staff. Seattle startup Friday Harbor wants to help all the other lenders who have smaller budgets but can tap into the power of artificial intelligence to stay competitive.

Founded last year, Friday Harbor on Tuesday announced a $6 million seed round led by San Francisco investment firms Abstract Ventures and Mischief.

The company launched its product in October and has 16 enterprise customers using its software to analyze a borrower’s loan file and quickly identify issues in real-time — some of which are typically caught weeks later by an underwriter.

Its system can identify undisclosed debts, large deposits, discrepancies across documents, problems with employment history, and other issues that can cause a mortgage to fall through at the last minute.

Customers include Developer’s Mortgage Company, NewFed Mortgage, and PRMG, one of the 25 largest non-bank lenders in the U.S.

The cost of producing a mortgage has about tripled since 2008, largely due to complex mortgage regulation and investor guidelines, said Theo Ellis, CEO and co-founder at Friday Harbor.

That means lenders are looking for ways to keep prices low and process loans faster in the face of rising competition. Ellis pointed specifically to Rocket, which just announced its acquisition of Mr. Cooper, the nation’s largest mortgage servicer that manages the ongoing administration of a loan and has direct access to borrowers that may be looking to refinance.

“Friday Harbor reduces the number of ‘touches’ required to originate a loan by catching issues with the borrower’s file at the very start of the loan process,” Ellis said. “The result is that the lender’s salespeople can ask borrowers the right questions, gather the right documents, and submit clean, complete, compliant files to their fulfillment teams.”

Ellis was previously an entrepreneur-in-residence at Seattle-based AI2 Incubator, a vice president at mortgage company Altisource, and an exec at fintech company Pagaya Technologies.

He co-founded Friday Harbor with Jesse Collins, who was also an EIR at the AI2 Incubator, and was a software engineer at Affirm, Fast, Zillow, and Curalate.

Friday Harbor has eight employees and has raised almost $8 million to date. Other backers include AI2 Incubator and Wischoff Ventures.

There are a bevy of startups aiming to speed up or disrupt aspects of the mortgage process, such as Tomo, which has roots in Seattle and just raised $20 million, as well as Novaprime, Valon, and Roam.