Loan Security: Don’t Bring a Knife to a Gunfight

The mortgage industry currently faces many challenges; among them market volatility, compressed margins,  and worries about profitability. The threats of fraud and just plain improper documentation on top of all that are stress points nobody needs, but everyone has to address.

This is why embracing FinTech, which has been slow-going in this industry, is so important, says FundingShield Chairman and CEO, Ike Suri. 

“Embracing technology has allowed players in the industry to not necessarily show up at a gunfight with a knife,” Suri said. “You need better tools, and those tools today are technology.”

Suri and FundingShield have their own weapons for you to bring to that metaphorical gunfight, and he discussed them with Mortgage Media’s Dave Matthews at the California MBA’s recent Innovators Conference.

Suri said he’s been involved in technology for about 30 years, mostly applying tech for businesses in industries ranging from healthcare to the airline to help them optimize their operations. Now, he said, it’s the mortgage industry that’s going through its time of serious re-evaluation and innovation.

The goal is a better, more profitable and painless, and less risky, experience for everybody in the mortgage process, from application and origination through closing and beyond — offering the highest level of protection from loss of funds through authenticating all data and monitoring all documentation. This is serious business, Suri noted. In many cases, what’s at risk is nothing less than people’s life savings.

“We provide financial technology tools for lenders, and other stakeholders in the mortgage industry, particularly at the closing menu, where  the most stressful part of the journey is for everybody involved,” Suri said. “And, our tools help lenders, and other stakeholders, mitigate risk, protect wire fraud, and make sure all the parties involved in it are authenticated, validated, vetted, and ensure money is going to the right place.”

Fifty states with different requirements, regulators, required parties and so forth, can be difficult for any company to keep track of. But it’s essential if the loan product is going to be compliant.

“It’s cumbersome work,” Suri said. “It’s a lot of work. It’s very stressful. It’s a lot of labor-intensive work and if you were to check off all the boxes that are required for compliance and regulatory issues, not all the firms would end up having the resources to cover that risk, to be compliant. And our automation basically facilitates that. And we take it down to a level where it’s optimized to such as degree that all states are covered, jurisdictions are covered. Our ecosystem records (the) history of these players, and we’ve got bad players recorded and shared within the ecosystem.

“… You may know the parties for 20 years, but the systems that they use, and the state that they use, and the technology that facilitates, is unfortunately also the technology being used by bad players, where it can be the source of breach of data or information. And unfortunately, it’s life savings on the line for many people.”

FundingShield has special staff (attorneys, paralegals and more) complementing its automated elements to make sure they’re up to date on all states’ laws and regulators, he noted. And as digital mortgages move closer to the norm rather than the exception, many companies are integrating and incorporating FundingShield into their platforms, to protect both consumers and lenders.

Some of the biggest challenges industry-wide in implementing FinTech are related to fraud.

“Fraud in general, in the mortgage industry, has gone up to an epidemic level. And if you go to the FBI website, it’s public news. Everybody’s aware,” Suri said. “There’s been a lot of fraud, at consumer level, where old hackers are stealing money on credit cards, but the biggest loot for them is usually at a mortgage closing. It’s the biggest purse that they can go after.”

In adapting FinTech to address these and other issues, the mortgage industry is going through a life cycle similar to other industries, he said. Acceptance starts with addressing customer satisfaction, but ultimately it has to be applied throughout the whole journey, not only through closing, but on through servicing. As people get accustomed to front-end tools like point-of-sale, they’ll slowly adapt the rest of the process to accommodate the new, helpful tools. However, that adaptation is slow, Suri noted. Change is never quickly accepted, especially in this industry. But if there isn’t change, you end up at that proverbial gunfight with a knife.

That’s why Suri said he and his colleagues have been busy for at least a year and a half on advocacy, trying to educate professionals on the FinTech need, writing many white papers contributed to panels across the country. 

And he’s seen progress. There have been advancements in application programming interfaces (APIs) which have allowed a number of mortgage industry players to realize that adopting such tech is not an untenable investment of time and expense. And several of his company’s current clients (such as prime banks) are pushing for non-bank lenders to use similar tool sets to improve loan quality, he said. Ultimately, everyone benefits, including the consumer, who’s not only offered greater protection but aided in a simplified process.

As for FundingShield? “Today, we facilitate ensuring the transaction’s airtight, and risk-free, and wire fraud-free, and compliant at the transaction level,” Suri said. “And right past that, it moves onto the next players that are our strategic friends as well … the post-closing issues of servicing and anything else that(is) found. We’re real-time, transaction-based, and focused on closing.”