Why doing good is good for the mortgage business: Angel Ai helps deliver fair lending

Sun West Mortgage's Pavan Agarwal highlights new tech's potential for increasing financial inclusion

Why doing good is good for the mortgage business: Angel Ai helps deliver fair lending

The following article was supplied by Pavan Agarwal (pictured) at Sun West Mortgage.

This is an especially challenging time in the real estate and mortgage business. Few affordable houses and interest rates at two-decade highs have led to continued declines in sales and mortgages. Aspiring homeowners have been priced out of the marketplace with minority groups being affected the most. Many groups face barriers beyond just marketplace conditions. There is a significant disparity between minorities and Anglo-Americans in mortgage approval rates. This disparity is a result of systemic discrimination, leading minority communities to feel discouraged from seeking financial products altogether.

However, AI technology is now disrupting the traditional approach to home financing. Angel Ai, a powerful tool, leveraging artificial intelligence (AI), is helping reshape and enhance the home financing process. With empathetic AI technology, these services have been streamlined, removing human error and bias along with the fear and embarrassment of being judged by another person - thus, creating a more accessible path to mainstream banking. As a machine, AI remains impartial, evaluating loan qualifications without considering race or ethnicity. Most importantly, the machine has no incentive to decline deserving customers simply because of the volume of paperwork, which is typically larger and more complex with underserved consumers. It focuses solely on the borrowers’ eligibility criteria. There is a continuous human hand behind the AI that monitors and educates the AI so that the AI can continually learn and never detour from the mission of fair lending now.

With AI technology, people who feel marginalized, and the ones who are afraid to ask because they are afraid of being embarrassed, can now go to a computer and say, ‘here is my situation do I qualify’, and the computer will respond with a clear ‘yes’ or ‘no’. Now, imagine taking it a step further: if the AI says ‘no’ it also provides guidance on what actions can be taken to qualify. In that way, we promote fair lending and that is effectively financial inclusion driven by AI.

We already have metrics that demonstrate that we are improving financial approval rates for minorities. In some cases, by 200%. To close the gaps in income inequality, we must provide better access to capital and lending for the underbanked. That is exactly what we are doing with Angel Ai.

When my father came to California from India 50 years ago, he built a successful business. However, he often prioritized helping people, even if it meant a short-term loss. He believed that doing good business by doing good was possible. This philosophy is reflected in the development and evolution of Angel Ai, and on June 24, we are expanding its capabilities to include assistance with credit repair.

Poor credit impacts mortgage approvals due to the increased risk of default it represents. Lenders manage this risk by denying applications, offering less favorable terms, or requiring additional, often redundant, safeguards. Fixing credit issues and improving creditworthiness can help borrowers secure better mortgage terms and approvals.

Augmented intelligence in financial services refers to the integration of artificial intelligence (AI) technologies with human expertise to enhance decision-making processes within the industry. Unlike artificial intelligence, which aims to replace human decision-making entirely, augmented intelligence seeks to complement human intelligence, empowering financial professionals to make better-informed decisions faster and more accurately.

Augmentation does not directly fight bias. The bias, intentional or not, comes from the process. The lending industry’s rigid workflow includes a series of documentation requirements and long, complex application procedures in English. This is intimidating to some in minority groups, discouraging them from participating in this mainstream financial undertaking. Our AI technology incorporates more than 100 languages and simplifies the loan application to a handful of simple questions, making the application process welcoming and inclusive.

Augmentation results are more exact, and AI improves the applicant’s experience and ease of use while reducing the costs to the consumer. We put safeguards in place to ensure the safety, accuracy, and reliability of financial decisions, giving people a new level of confidence. The results are dramatic with approval rates improving for certain ethnic groups by over 50% in some cases.

The other critical components are financial education and financial literacy, arguably the most critical area for long-term progress in closing the wealth gap. This must start with basic education in schools and be developed and funded by financial institutions. While progress so far has been disappointing, we are trying to solve it by having our AI program handle more direct questions and providing easy access to answers.

If we make access to financial resources easier and more equitable, we incentivize the home builders. Currently, many builders prefer to build high-end condominiums when banks offer them below-market interest rates. With several recent large-scale banking collapses and other national economic problems, many of these condominiums or apartments sit empty, yet many still need housing. The market has also allowed large investors to manipulate supply to artificially keep prices high with affordability out of reach.

In the meantime, banks are not pursuing low-income borrowers even though there are government programs designed specifically for them. While banks used to do a lot of these government loans, due to lending rule complexities, trained labor shortages, originated loans riddled with human error, and other problems, banks have avoided those products, restricting access to low-income financing.

Many myths and misperceptions keep eligible people out of the home-buying pool; even industry professionals lack all the knowledge about the government programs and policies designed to help. This is another area AI can address. Unbiased and immediate decisions and credit analyses can determine the lowest cost option for homeowners without relying on a manual review, and it can be delivered over a simple chat discussion with an AI assistant.

Angel Ai is already bringing together home buyers, realtors and mortgage professionals allowing for fast, efficient, and trustworthy execution of the home financing process. Beyond the immediate benefits of Angel Ai, we are solving for a bigger issue – fair lending for all. If we can get more financial resources to a broader group of people, we incentivize building more affordable housing. This creates a virtuous circle - doing good and creating good business for our industry.