Leveraging Technology to Address Industry Challenges

The mortgage industry is no stranger to fluctuations, whether in terms of repurchases, headcount,

or the evolving landscape of loan products. As we navigate through the complexities of this

sector, one thing becomes increasingly clear: technology holds the key to mitigating many of

these challenges. By harnessing the power of AI and other advanced technologies, we can reduce

pain points, avoid past mistakes, and improve overall quality in the industry.

However, while AI promises significant advancements, it is crucial to distinguish between the

hype and the reality of its capabilities. There is a persistent need for the human element in

processes like underwriting, especially when borrowers have unique circumstances. AI, whether

in the form of ChatGPT for writing letters or more sophisticated systems for underwriting, still

requires human oversight to ensure accuracy and fairness.

The Role of AI in Mortgage Underwriting

AI is evolving rapidly, and what might seem like hype today could become reality tomorrow. At

Candor, we are constantly evaluating new AI techniques and technologies to see if they can

benefit our customers and meet regulatory standards. While the idea of a push-button loan

approval is appealing, we are far from achieving that level of automation without human

involvement.

Traditional AI, such as the rules-based systems we use at Candor, plays a critical role in

synthesizing data and assisting in underwriting decisions. Unlike generative AI or machine

learning, these systems rely on predefined rules and logic to process information. This approach

ensures transparency and consistency, which are crucial for regulatory compliance and trust.

Challenges with Generative AI and Machine Learning

Generative AI and machine learning are promising technologies, but they come with significant

challenges, especially in the mortgage industry. Training these models is costly and requires

large amounts of high-quality data. Any biases or errors in the data can lead to unreliable

outcomes, which is unacceptable in lending decisions.

Moreover, regulatory bodies like the CFPB demand transparency in decision-making processes.

The complex algorithms used in generative AI can be difficult to explain, making it challenging

to meet transparency requirements. Therefore, while we remain open to the potential of these

technologies, we proceed with caution and prioritize accuracy and fairness.

Staying at the Forefront of Innovation

To stay at the leading edge of innovation in a rapidly evolving space, Candor relies on a team of

highly skilled professionals and strategic partnerships. Our team continuously evaluates new

technologies and trends, incorporating those that prove beneficial and setting aside those that are

not yet ready. This approach allows us to remain agile and responsive to industry developments,

ensuring that we offer the most effective solutions to our clients.

Candor is making significant strides in enhancing its product offerings. Here are some key

updates:

1. Prequal Tool: Our Prequal tool is designed to assist loan officers (LOs) and loan officer

assistants (LOAs) by generating a customized, borrower-specific needs list. This tool

evaluates the application, AUS, and support documents, providing a comprehensive list

of required documents within 15 to 20 minutes. By addressing potential issues early, it

improves the fulfillment process and enhances the borrower experience.

2. FHA Product: We have completed coding on our FHA product, which is currently in

beta testing. This tool automates the evaluation of FHA applications, AUS, support

documents, and investor guidelines, issuing conditions and clearing them upon

satisfaction. As the first of its kind, this product addresses the growing demand for FHA

loans and offers significant efficiency gains for our clients.

3. Candor Plus: Our Candor Plus offering partners with a business process outsourcer

(BPO) to provide a human-in-the-loop solution. This allows clients to scale their

operations without the roller coaster of hiring and layoffs. By leveraging our technology

and BPO expertise, we offer a variable cost basis, making it a cost-effective solution for

managing fluctuations in loan volume.

Conclusion

The mortgage industry faces ongoing challenges, but by leveraging advanced technologies like

AI, we can address these issues and improve overall quality. Candor remains committed to

staying at the forefront of innovation, continually evaluating and incorporating new technologies

to enhance our offerings. While the role of human oversight remains essential, the advancements

we are making in AI and automation are paving the way for a more efficient and reliable

mortgage process.

By dispelling misconceptions and demonstrating the tangible benefits of our solutions, we aim to

build trust and confidence among our clients and industry stakeholders. The future of mortgage

underwriting lies in a balanced integration of technology and human expertise, ensuring

accuracy, fairness, and regulatory compliance.