Computers are everywhere, and there are plenty of people who’d like to get into yours. (Of course, security is not confined to computers. I was on the phone last night with a friend, and he told me that a few years ago his identity was compromised and several credit cards were stolen but that was about it. He never turned it into the police because he discovered that the thief was spending less than he did.) Not only that, but computer scientists are racing ahead with developments focused on artificial intelligence. And what about borrowers who want to film the transaction? Let’s check in.
Intelligence, artificial and otherwise
Lower, a technology company aimed at improving the online mortgage and refinance experience, announced the launch of its company and internal, proprietary artificial intelligence (AI) technology. “LOAi is a first-of-a-kind mortgage recommendation engine that uses AI to analyze thousands of data points and past loans to instantly provide loan advisors with personalized loan selections. The technology helps homebuyers who get their loans online but might not know if they are getting the best loan possible. Lower also offers a simple application that can be completed in minutes on a desktop or mobile browser. By answering a few straightforward questions in a conversational format, potential borrowers can get a personalized loan recommendation without the need to complete lengthy online forms or find, scan and submit paperwork. Lower was founded by Dan Snyder, co-founder of one of the nation’s fastest growing mortgage companies, Homeside Financial.”
What about monitoring sleepy underwriters? EyeSight, an Israeli startup, uses facial recognition processing and A.I. to track drivers’ eye-openness, gaze direction, and head position to determine overall attentiveness. When the system determines that the driver is distracted, it switches over to self-driving mode. The EU will require driver monitoring systems like this by 2020, so more distracted-driver watch bots are on the way.
AI Foundry president and founder Steve Butler has written the following predictions for 2019 for mortgages, AI, and banking. “AI kills OCR. In 2019 we will see rapid declines in OCR (Optical Character Recognition) use in document processing. OCR was invented a century ago and is losing its utility in modern times, because it can’t do anything intelligent with the text it scans. OCR will give way to artificial intelligence (AI) technology that enables machines to “read and react” to human-written content. This will enable a boom in “white collar automation” where manual document processes (such as mortgage processing) are replaced by software-based robotics processing.
“The Veil Comes off ‘Instant Mortgages.’ In the coming year consumers will get more savvy and educated about claims of ‘instant mortgage approvals.’ It still takes weeks to process a mortgage and ‘approved in minutes’ applicants can still get turned down by underwriters. Mortgage lenders will turn to back-office automation to speed the byzantine mortgage-approval process, so consumers can have a true ‘Uber experience,’ where mortgages are approved in hours, not weeks. This will enable home buyers to have an approved mortgage in hand when they bid on a house, closing the competitive gap with cash buyers.
“Mortgage Processing Comes Back to the U.S. – Most Americans do not know that when they apply for a mortgage, most often their personal financial information goes overseas to processing centers in India, the Philippines and other low-wage countries. We have seen more ‘onshoring’ recently and this trend will continue and grow in 2019, driven by a number of factors, including regulations, increased customer complaints (and resulting reputation damage) and companies gaining a better understanding of the true costs of offshoring. With state privacy regulations becoming stricter (California leading the way), lenders will bring mortgage processing back ‘onshore’ to the U.S. This will cause a spike in back-office automation investment as mortgage lenders try to keep processing costs down, while complying with emerging privacy regulations.
“Lenders Turn to AI to Reduce the Cost and Time to Close a Mortgage – Today, it takes approximately three weeks to close a mortgage, starting from the time that the mortgage application is started, through providing information, processing, reviews and underwriting, and to finally closing. Artificial intelligence will drive a new generation of ‘software robots’ that automatically process mortgages, replacing slow and costly manual processes. In 2019 we will begin to see approval times drop from the current norm of 3 weeks, and “one day approvals” will become the norm within five years.”
Steve wrapped up with, “Real Estate Firms and Sites become “One Stop Shops” – In 2019 we will see more forward-thinking real estate firms and websites becoming “one stop shops” for the home buying experience. Examples include Keller-Williams (with Keller-Williams Mortgage) and Zillow acquiring Mortgage Lenders of America. This horizontal model is similar to how automobile dealers also offer financing, maintenance, etc. The new model will enable buyers to access everything they need (financing, legal counsel, accredited inspectors and contractors, etc.) from their realtors, rather than having to rely on referrals and research.”
Bitcoin & blockchain: things are moving fast
Thanks to Candace G. who sent along this note about how Ohio began accepting bitcoin as payment for 23 types of business taxes. The state treasurer’s office said Ohio is, “working to help make Ohio a national leader in blockchain technology.” (Not to mention the Football, Rock n’ Roll, Polka, and National Aviation Hall of Fames.)
From Southern California comes news that First American Financial Corporation announced the launch of a shared blockchain system designed by First American to “increase efficiency, reduce risk and improve the title production process. The system is intended to facilitate the exchange of prior title insurance policies between underwriters that contribute to the system. Old Republic Title Insurance Group, the nation’s third largest title insurance underwriter, has committed to be the first to participate. Each policy included in the blockchain system will be coded with a unique identifier by property, streamlining the search process and increasing the accuracy of searches for prior title insurance policies.”
The SEC is advising companies to disclose potential risks from the effects of Brexit, phase out of LIBOR and increased cyber risk.
Central banks may find uses for distributed-ledger technology in the future, but the case for using it today “remains unproven,” said Agustin Carstens, general manager of the Bank for International Settlements. Central banks in Canada, Japan and Singapore have looked at whether the technology could improve efficiency of securities and derivatives clearing, and blockchain was found to be “broadly similar to existing infrastructures, and not clearly superior to them,” he said.
On the constantly evolving topics regarding cybersecurity, Mitch Tanenbaum weighed in. This commentary noted, “In the world of cybersecurity, it is often difficult to know how much security is too much. This is important when you consider a recent survey from FICO. It shows how fed up consumers are with the security hoops they need to go through to verify their identity. This is despite the constant barrage of information about data breaches and card compromises.”
Mitch observed, “People (consumers) don’t care, for the most part, because they are made whole, even if it is their fault. One cell provider in Europe was charging customers for fraudulent online gambling charges because they chose bad passwords and that allowed the fraud to happen. If consumers were financially responsible when their poor cyber hygiene practices allowed fraud to occur, they would become very supportive of cyber security. I doubt that will ever happen in the U.S., but in reality, it does because the tens of billions of dollars that merchants lose is recovered in higher prices. I don’t know that they care as much about losing their data as they do about a bad guy emptying their bank account.
“I was interviewed on local TV recently about a situation where a lady’s phone was hacked and the bad guy used it to reset her online banking password (and this works even if you do not use online banking, by the way) and empty her bank account of $5,000 plus. She was seriously upset. Losing five grand will do that to you. Likely the bank will eat the $5k in the end but that day her bank account was empty.”
Cybercrime experts will tell you that the most common way into your organization is through email. Mitch noted, “We have had title companies and mortgage brokers come to us after the fact of having been spoofed out of more than a hundred grand each in several cases. In most of these cases, they ate that because the protections for consumers, for the most part, DO NOT APPLY to businesses. Businesses are supposed to be sophisticated. Will losing a hundred grand make you rethink your cybersecurity program? The SEC has been investigating some publicly traded companies who collectively lost close to $100 million to these email scammers. Why are they investigating them? Because the SEC wants to see if these companies violated the Securities Exchange Act of 1934 for not having sufficient security controls in place. They don’t care that these companies lost $100 Mil, they want to see if they should be sued in federal court for it.”
This commentary suggested that, “IT departments, along with folks at home, should use two-factor authentication (“2FA”) with remote access. A six-digit code is sent to you. Personal email (gmail, Outlook, iCloud) all offer two-factor authentication.” Mitch responded with, “I totally support you encouraging two-factor authentication but people should absolutely, positively NOT use text messages. Way too easy to spoof.”
Lastly, regarding experts saying that using “the cloud” for critical data storage is a mistake, Mitch responded with, “I guess that means that the cloud-based LOS should close their doors – OpenClose, Encompass Nextgen, Rocket Mortgage and a bunch of others that are hybrids – local application but the data is in the cloud. And also, I guess that Amazon should shut down too. The reality is that for most companies, the cloud is probably more secure than that poorly secured server sitting in the corner.” Thanks Mitch!
What about borrowers or bank customers recording every office visit on video? Steve Brown with PCBB advised, “No matter what your customers import into the branch when they visit, taking video on their phone is a definite no-no. Sadly, more and more customers are using their cell phones to videotape even routine commercial interactions. That increases risks for banks. Look no further than videos posted of employee-customer interactions gone awry on social media. These depict everything from passengers being dragged off airplanes to shouting matches and even fist fights. So far, banks as a group haven’t seen too much, but that’s not a reason to assume it won’t happen. Instead, it’s a reason to get ahead of the trend by training staff members and setting up guidelines.
“Your overall goal should be to prevent people from videotaping bank activities. This is for everyone’s security, so it makes sense well beyond just the issue of potential embarrassment.
Post clear signs stating that no unauthorized photography or filming is permitted on bank property. Tighten up procedures and train staff to be alert. Have scripts that employees can use when a customer starts taking unwanted photos or video. Make sure that procedures have been practiced by frontline employees, so it is second nature, if and when needed. Staff should smile and be polite to any customer, even an irate one that begins photographing or filming an interaction. If you are handling a transaction, put that work on hold until the customer has stopped filming. Explain that, because of concerns around security and confidentiality, no unauthorized photography or filming is allowed on the premises.”
Steve’s advice went on. “If the customer refuses to stop filming, point out the posted signs forbidding it. Tell the client that the bank is not public property, and it has the right to prohibit customers from filming interactions because of the sensitive nature of those transactions. These days, even some employees might feel tempted to record a rude bank customer or a heated conversation. They might even use a cell phone to videotape a customer who has begun filming. It is critical to train everyone to resist this temptation and to lead by example no matter what. Recording a customer — even if the customer is rude, wrong, or began filming first — is a sure way to escalate things.
“Besides taking the above measures, banks can avoid viral videos by reminding employees that you expect professional, cordial, respectful behavior at all times. Doing so will remind everyone to keep calm even when a customer is using their phone to record things.”
(Thanks to Ann M. for this one.)
When he was having a senior moment and couldn’t place people, journalist Charles Michelson (FDR’s speechwriter) used this ploy to avoid offending them.
When a person asked, “Do you remember me?” he would answer, “Yes, and it turned out you were right, didn’t it?”
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Servicing: Don’t Underestimate Liquidity.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2018 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)
- Dec. 31: Rates, the Fed, world economies, affordability, and the shutdown – all tied together - December 31, 2018
- Dec. 29: FEMA reverses flood ruling; cybersecurity notes; observations on general housing trends - December 29, 2018
- Dec. 28: Doc automation product; FHA & VA changes around our biz; Agency deals continue to share risk - December 28, 2018