It models an underwriter and forensic auditor's thinking process
Candor Technology announced it has been granted a patent for its CogniTech™ Expert System Technology which models an underwriter and forensic auditor’s critical thinking in the mortgage lending space.
Using Candor’s Loan Engineering System (LES), Candor clients have reported increased underwriter productivity by 400%, decreased turn-time by at least 10 days, and increased pull-through by 15%. With this data, Candor estimates the reduction in repurchase exposure goes from 12bps to 1bps.
MPA reached out to Candor CEO Tom Showalter (pictured) to learn more. “Our infrastructure is not only just modeling an underwriter and modeling a forensic auditor,” he said. “It’s also creating an inference network. “We not only go through the actions, but we translate those into mathematics that leads to us understanding how much we’ve reduced repurchase exposure and how much we’ve created the likelihood of this borrower getting a loan. So we have a network that creates estimates, it doesn’t just go do stuff. It actually leads to an inference network.”
He provided a comparison between his technology and prevailing methods: “Our repurchase exposures is now dramatically less than one basis point, or one-thousandth – probably more like one hundred thousandth – and the typical human process is 12 basis points.” That translates into a difference between $300 and $400 per loan by human methods versus about $1.94 with the Candor technology, he noted. “We’ve gone from humans doing stuff to that link to an inference network that’s associated with outcomes and the problem. It’s very robust mathematics and a very robust process.”
The patented technology operates as an unbiased data matching and validation system. The system conducts a consistent underwriting of a loan or other financial asset, leveraging its access to and ability to interpret and compare data from multiple sources that leads to the quality underwriting of a loan, officials explained. “Candor’s technology doesn’t operate in the shadows of a black box, but rather creates a transparent and auditable underwriting trail that is preserved in a permanent, immutable, quantum ledger database,” according to the corporate literature.
Showalter said the patent further solidifies Candor’s mission to conduct autonomous, extensive loan data analysis using expert systems technology and then leverage that analysis to make complex underwriting decisions and clear conditions leaving the underwriter to be able to focus on more difficult tasks. To date, Candor’s Loan Engineering System has conducted more than 1.8 million underwrites for banks, credit unions and mortgage lenders with zero repurchases.
“At Candor we strive to create best-in-class technology to benefit the consumer, the lender and the mortgage investor,” he said. “Receiving this patent on the technology we have spent years perfecting is tremendously rewarding, as it propels us forward in our goal to break down barriers to homeownership by bringing greater ease and efficiency to the mortgage loan process.”
Improving the economics of making a mortgage – with the fintech startup’s AI platform specifically designed to duplicate the critical thinking and problem-solving abilities of a seasoned underwriter and a forensic auditor – has proved immensely effective for the young company. The Atlanta-based company’s technology and approach has gained steady traction since its 2018 founding. Today, more than 60 people work for Candor. It has raised $5 million in seed financing and conducted a $12.5 million Series A round led by Arthur Ventures. Earlier in February, Candor also announced that it had signed its 60th client – Churchill Mortgage – since its Loan Engineering System (LES) platform went into production in September 2020.
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Notwithstanding the technological wizardry of his product, its aim is a simple one: “It’s been very hard in the mortgage industry to produce a loan of extremely high quality, meaning the data has been vetted and inspected and is what we say it is,” Showalter told MPA in a previous interview. “It’s very hard to have loan quality and also have speed and efficiency and good margins. You couldn’t do all of that, because to add quality and add people means hours - and hours means increased costs.”
Candor’s technology addresses both speed, quality and productivity while protecting margins, Showalter added: “We created technology that can get the ‘better, faster and cheaper’ [element], and most technologies force you to choose,” he said.