Fintech

Blockchain expert: The future of fintech and innovation in mortgage finance

ComplianceEase Rocks the Climb to the Summit

Continue the Climb – the theme of the 2017 ComplianceEase Risk and Compliance Summit – was very appropriate given the regulatory climate and lightning speed at which technology has been and will continue to morph the mortgage industry. The sold-out summit, which occurred Nov. 1 through 3 in San Francisco, had a power-player list of panel speakers and covered a wide variety of topics. 

Subjects included those focusing on technology development including digital mortgage and fintech, as well as topics pertaining to regulatory concerns such as preparing for exams, state enforcement and fair lending.  The presence of Mick Jagger was also felt as the dinner keynote speaker talked about his involvement in founding Rolling Stone Magazine. 

The summit had a collegial energy to it, not often felt at large scale conferences and included mobile device polling options. Dan Smith, Summit Chair and senior vice president of ComplianceEase, led the event with his introductions and lighthearted jokes throughout each day. Don Lampe, partner at Morrison & Foerster, one of the primary hosts of the conference, opened the conference by talking about the meaning of risk management.  The succeeding panels included commentary from mortgage experts, lawyers, and regulators including David Lykken, Ken Markison, Rick Hill and Chuck Cross.  Each of them brought forth their unique perspectives on the topics.

The audience appeared mesmerized when Chuck Cross, senior vice president of Consumer Protection and Non-Depository Supervision with the Conference of State Bank Supervisors, shared that penalties do not simply occur without an attempt by the regulators to work with the companies.  He went on to state that one of the more highly penalized mortgage industry players repeatedly failed to respond to simple requests for information prior to any reprimand, which eventually led to a plethora of scrutiny, violations and monetary penalties. 

David Lykken, president of Transformational Mortgage Solutions, and Lampe discussed the era of social media and led conversation around having social media policies.  Perhaps one of the more light-hearted moments (other than the after-dinner karaoke) was when Lykken shared with the audience the Le Trefle commercial, reinforcing the power of digital as paper becomes obsolete.

Fintech innovation lab

I was fortunate enough to participate on a panel moderated by Jason Roth, chief technology officer with ComplianceEase, and alongside Teresa Blake, managing director at KPMG, and Frank Tuttle, senior vice president at ComplianceEase.  Our panel took on the broad topic of the “Fintech Innovation Lab.” Prior to our fintech group, a panel covered aspects of the digital mortgage process and eClosings.  Thus, our fintech panel was able to bring in many of the ancillary topics related to innovation.

The fintech panel included topics related to the digital mortgage, including the changing role of the loan officer and broker as the digital mortgage evolves.  We also focused our discussions around using innovation to directly verify income and assets. Involved with all of this, I highlighted some of the legal and compliance challenges associated with the digital process including, for example, the relationship of technology when it supersedes the implementation of regulation. 

Some of the other areas that were also highlighted encompassed:

  1. Introduction of blockchain into the mortgage industry,
  2. The use of alternative data in credit decisions,
  3. How artificial intelligence interplays in the process
  4. Other trends in technology investment in the mortgage industry.

Blockchain

Blockchain is a topic that is kicked around often, but it continuously seems like those who are not directly in the tech world have difficulty digesting what it is and the power it has to transform industries.

People often seem to understand that it is the technology which was originally developed as the platform for bitcoin, but then there are the key concepts that make it ready to be released for other industries:

  1. Distributed ledger stored on a decentralized database
  2. It is immutable and entries are time-stamped
  3. The process allows for data validation
  4. It is less susceptible to cyber breaches due to the decentralized storage

 Our panel discussed a few of the use cases in blockchain including valuation, chain of title, servicing and transfer of documents and, of course, audit. During the closing of the summit, it was clear that the participants were eager to do a little more research and digging into what blockchain might be able to offer to their organizations.

Alternative data in credit decisions and artificial intelligence

Another topic that our panel thoroughly discussed was the use of alternative data in credit decisions. If lenders use data in addition to that provided by the credit agency, including, for instance, rental history, prescription drug use, auto insurance, will lenders be able to use such data to to make credit decisions and potentially open up credit to “thin-filed” borrowers and allow for a greater pool of mortgage applicants?

This topic dovetailed into the discussion regarding artificial intelligence and how data can be collected on a person using, for instance, social media and websites that track things purchase history, location and networks. 

We discussed how loan officers may be able to use “bots” to collect data using artificial intelligence and have a more thorough understanding of the borrower to be able to help them communicate with borrowers and ideally find loan products which suit their needs. The discussion tone switched from one of “idealistic” endeavors to “realities” when some a couple of use cases where shared.

Blake discussed trends in technology investment in the mortgage industry from her vantage point.  She is helping clients in deploy base foundation technology change like loan origination system replacements but also discussed the new digital worker and how robotics is changing how we work.  She was very excited to see the early stages of this transformation and the road ahead will help improve the experience for both borrowers and lenders.

Cyber security

A conference regarding risk and compliance would not be complete without a thorough session on cyber security.  As the conference neared to closure, one of the final panels included Rick Hill, vice president of technology with the Mortgage Bankers Association, Jason Roth, chief technology officer with ComplianceEase, Justin Kirsch, CEO of Access Business Technologies, and Alex Wood, vice president of information security and chief information security officer with Pulte Mortgage, who led an interactive conversation about what the audience, as compliance leads, can do to protect the tremendous amount of private and confidential information that is shared by our industry. 

While I would advocate that blockchain should be at the core of alleviating cyber risk in the future, I was not on the panel.  Others on the panel shared how they educate their workforce and take proactive auditing measures. One of the greatest concerns voiced around the room was concern regarding wire fraud in which unsuspecting borrowers were wiring funds directly to hackers.

“Our goal for this inaugural conference was to provide timely, practical content from respected industry experts that our attendees could take back to their companies and discuss implementation with their management team,” said Dan Smith, Summit Chair and senior vice president of ComplianceEase. “Based on the feedback received, our attendees confirmed that the presentations and interaction exceeded their expectations.  We will apply the feedback received which will help us plan our 2018 event.”

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