03Jul

How AI Brings Trust to Loan Portfolios

July 3, 2023 lionfiregroup

Blog post originally posted on the TRUE blog post

Imagine an alternate reality where trust does not exist…

In this world, everyone requires documented evidence for any assertion, any claimed fact. The administrative toil it would take to overcome relentless suspicion and doubt sounds like a dystopia fit for a movie!

If you work in the mortgage industry, this fictitious scenario might not sound so far removed from your daily reality. Lending decisions are based on information presented by borrowers, but borrower data cannot simply be trusted as fact. And so ensues a process of gathering and reviewing documentary evidence, the results of which are checked and rechecked in a complex and costly process of continual quality control (QC).

Here’s how Garth Graham, Senior Partner at mortgage industry advisory firm STRATMOR Group, characterizes the situation.

This reality is no longer one that our industry must endure. In TRUE’s version of this movie – and this really is a true story – ingenuity intervenes to save the day.

TRUE customers throughout the lending industry, from originators to funders, are integrating artificial intelligence (AI) into QC processes. Their reality is one where the toil of processing borrower documents is removed, automated verification virtually eliminates doubt about borrower data, and assessments of risk are much lower as loans are traded to the secondary market.

AI in the Post-Closing Process

Lenders using TRUE, industry proven AI that captures and verifies trusted borrower data, will typically use this technology at the start of loan manufacturing. The TRUE AI platform automates document-to-data classification and extraction tasks with levels of accuracy and completeness that greatly exceed the performance of unaided humans.

However, the most important phase of QC is arguably the post-closing process. This is a lender’s last chance to ensure the accuracy, completeness and integrity of the data that supports its loan decision. Applied here, TRUE’s AI brings a high level of automation to most post-closing QC tasks. This includes:

A complete audit of the accuracy and correctness of the loan application
The presence, correct versioning, execution (signatures) and accuracy of all underwriting documents, including re-verifying them if necessary while ensuring data integrity
A check of the underwriter’s decision which supported the loan application
Verification of the appraisal, property eligibility, project eligibility, and the mortgage insurance documentation

By integrating AI, lenders can be confident that every loan in their portfolio has been audited to the highest possible standards of accuracy and completeness before the portfolio is offered to permanent funders and servicers.

Passing Investors’ Test of Trust

Any mortgage sold in the secondary market must meet requirements set by investors, such as underwriting criteria, documentation standards, etc. Investors sample a small percentage of loans within a portfolio to identify those which fall below their standards.

For lenders, these tests are a major point of risk. Defects in the data, and a lack of supporting documentation, can be extremely costly. There may be individual loan buybacks, demands for additional testing of a broader sample, or rejection of an entire portfolio if too many loans are assessed as substandard.

The AI in the TRUE Platform reviews individual loans in minutes, which means 100 percent QC can be performed across entire mortgage portfolios in a matter of hours. This capability is offered in a product, TRUE Data Verification. It helps to ensure every loan meets the specific criteria set by the purchasing investor, with interrogation down to the level of individual documents.

When both lender and investor apply TRUE to the trading of loans, this test of trust becomes highly automated, fast and efficient. It means zero or very few defects, faster turnarounds allowing warehouse funding to be paid sooner, and ultimately improves lenders’ quality ratings which lowers the costs of funding over the long-term.

Servicing Transfer

Lenders and loan quality are also key factors for mortgage servicers when bidding for portfolios. Accurate and complete loan data is paramount when loans are transferred to a different entity for ongoing servicing, and this is where AI can play another role in creating trust.

By reviewing loans with the support of TRUE Data Verification, lenders can be certain that they’ve provided a complete package of data and documents. Servicers can use the same technology and processes to assess loans on the way in, with greater confidence in risk scoring allowing more aggressive bidding.

Convenience and Compliance

Two further post-closing challenges that are eased by TRUE are document retrieval and auditing for regulatory compliance.

The TRUE Platform makes it easy to for lenders to apply document retention policies that ensure regulatory compliance and minimize long-term storage costs. As TRUE processes each document, it creates a permanent association between data points and their source documents. This allows anyone from loan officers to auditors to quicky retrieve and interrogate any information, including for queries that arise during post-closing QC.

Data reviews can also be aligned with rules contained in regulations such as the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), and relevant state and federal consumer protection laws. This helps lenders audit all loans for compliance and provides a document trail that can be provided to external assessors.

An Ending Based on Truth

A world where there is assurance of facts is one where trust flows easily. TRUE is helping both lenders and secondary market entities change the plot of the lending story to one that always has the happing ending of proven data, lower risk and easier trading of loans.

It may not have the drama of movie dystopia, but it’s a state of affairs that the mortgage has long sought and, thanks to AI, can now achieve.

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18Mar

The Continuously Improving ROI of Trusted Data

March 18, 2023 lionfiregroup

Blog post originally posted on the TRUE blog post

What is the return (ROI) on your technology investments, and what role does clean and trusted data play in these investments, and across the mortgage industry?

This paper provides a thorough exploration of these questions.

Written by highly experienced analysts in the fields of ROI, data automation, and artificial intelligence (AI), and applied to the specific challenges and demands of mortgage businesses.

Many ROI assessments focus only on productivity and efficiency, but in this report we also consider:

The Data Flywheel: the virtuous circle and accelerating benefits from continual discovery and exploitation of more and better quality data
Why Clean Data is Trusted Data: why the value of data increases with use, enabling staff to be more efficient, confident, and innovative
Business Elasticity: how trusted data finally enables lenders to adapt to changing volumes without the costs and challenges of hiring and firing
Cost to Correct: how AI and automation helps to reduce costs and mitigate risk by preventing data errors or identifying them sooner
Exponential Potential: why intelligent automation leads to cumulative ROI impact and creates the potential to build more competitive lending businesses

AI-powered data automation is being adopted by more mortgage lenders. The aim of this paper is to provide you with questions and expert insights that will help you to evaluate the need, effects and timing of automation investments, equipping you to compete in an industry undergoing digital disruption.

Download your copy today.

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20May

3 Ways for Lenders to Boost Efficiency in Appraisal Operations

May 20, 2022 California MBA

As the mortgage industry shifts more of its traditional workflows to digital operations – such as with eSigning, eNotes, eVaults, and more – the appraisal process cannot be an afterthought. There are numerous inefficiencies associated with the “old world” of appraisals that are slowing mortgage lenders’ turn times, keeping production costs high, and negatively impacting the borrower’s experience – all of which ultimately affect the bottom line.

This guide highlights three key areas where efficiency gains have been proven to generate measurable ROI: appraisal ordering and vendor allocation, appraisal payments, and communication and visibility. These lender-appraiser touchpoints are riddled with manual, error-prone tasks that are better executed by technology. Automation will not only expand employee bandwidth, but it will also do the work faster, more effectively and with greater accuracy.

Click above to open and download the guide ^^ (there’s no form!)

By focusing on modernizing operations in the three aforementioned areas, lenders have reported increasing efficiency by 213% and reducing their appraisal desk staff by 75%, among other quantifiable benefits.

Want to achieve similar results? Download this free guide to better understand where inefficiencies exist in your appraisal operations and the steps your organization can take to improve its appraisal-related processes and maximize impact.

If you would like to learn more about how Reggora can help, reach out to schedule a conversation with our team.

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20May

5 Things to Know About Desktop Appraisals

May 20, 2022 California MBA

Beginning in March 2022, Fannie Mae and Freddie Mac will begin to accept desktop appraisals. This means that a licensed appraiser will be allowed to complete the home appraisal without physically visiting the property. Instead, they will leverage data that can be made available to via third parties (homeowner, realtor, builder, etc.) and through public sources.

While desktop appraisals should enable faster (and potentially cheaper) approaches compared to the traditional appraisal, there are many caveats that lenders and appraisers should be aware of.

This guide from Fannie Mae provides initial details and guidelines for how desktop appraisals will work. There’s quite a bit to unpack here, as well as a few things that we’re awaiting clarity on, but we’ve summarized the key takeaways below, and in this LinkedIn video from our CEO. To dive even further into the topic, be sure to register for our upcoming webinar with Fannie Mae and Freddie Mac on desktop appraisals.

Here are 5 things lenders and appraisers should know:

1. Eligibility

Not all loans are eligible for desktop appraisals. The loan must be for a purchase transaction, one-unit principal residence, where the loan-to-value (LTV) ratio is less than or equal to 90%. On top of this, the loan file must also be approved by Fannie Mae’s Desktop Underwriter (DU).

2. Floor plans

A floor plan with interior walls is required. These floorplans typically don’t exist out in the wild, so an onsite inspection will often still need to occur. This inspection might be able to be done by someone other than an appraiser, such as the homeowner, realtor, builder, etc.,

NOTE: These floor plans and measurements may need to abide by ANSI standards starting April 1, 2022. This is something that we are awaiting further clarification on.

3. Appraiser discretion

The appraiser must have sufficient information to develop a credible report. The appraiser has the discretion to reject the order if they don’t feel comfortable with the data available to them. This means that getting high quality data to the appraiser for the floor plan and other property characteristics will be very important.

4. Verification

Any data (including potentially the floor plans mentioned above) that is provided by third parties with a financial interest in the sale or financing of the property (homeowner, realtor, builder, etc.) MUST be verified by a disinterested source. This could include maps, assessor data, or virtual inspection technologies. It will be important to accomodate any validation and verification processes that will be required by the appraiser, the lender, or both,

5. It’s optional

When permissible, ordering a desktop appraisal is optional for the lender. The lender or borrower always has the option to request that a traditional appraisal is obtained, regardless if a desktop or some other form of appraisal relief is offered.

As this initiative moves forward, it will be of interest to see the frequency of eligibility for desktop appraisals, and, when eligibility is offered, how often requests for desktop appraisal are actually fulfilled. Either way, this is important progress in the industry that will pave the way for further modernization and alternative products. For more insight on desktop appraisals, view our March 2022 webinar with Fannie Mae and Freddie Mac on the subject.

How can Reggora help? Our goal is to make it easy for lenders and appraisers to adopt desktop appraisals, and we’re currently working closely with Fannie Mae, Freddie Mac, and our appraiser and AMC partners to understand the nuances and provide guidance to the industry. If you have questions about leveraging desktop appraisals and what you should do to prepare, please contact your Reggora customer success team or reach out to our sales team here.

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