How lenders are adapting new tech to strengthen underwriting activity

December 11, 2023 2:55 PM

As consumer appetite for new loans continues to decline amid a fluid, but elevated, interest rate environment, lenders are turning to tech partnerships for tools that can help bolster underwriting portfolios.

Research conducted earlier this year by IntraFi found that roughly 78% of the 597 bank executives surveyed estimated that the Federal Reserve would raise interest rates by at least 25 basis points or more before the end of 2023. More than 80% of respondents also estimated that the Fed would lower interest rates no sooner than the third quarter of 2024.

At the helms of the more tech-minded credit unions, mortgage lenders and financial technology firms, leaders are adapting products such as "soft check" credit scoring, artificial intelligence-powered bots to streamline application reviewal and more.

Below are examples of these tools in action.

Using its collaboration with the income-verification fintech Argyle, Georgia United Credit Union is combating fraud attempts during the loan-underwriting process.

How a Georgia credit union is combating loan fraud

Andrew Woodman is enlisting more advanced technology to protect Georgia United Credit Union from the growing threat of consumer loan fraud, which he says has changed the nature of lending.

"I've been doing this long enough to remember when we used to actually have our team members pick up the phone and do [income] verifications ourselves verbally, and as soon as those procedures and technology transitioned, the expenses to use the services that are out there began to significantly rise as well," said Woodman, who has spent seven years at the $2 billion-asset credit union and became senior vice president of mortgage lending and loan trading in March.

Georgia United, based in Duluth, formed a partnership early in the year with the fintech Argyle, which offers a platform to verify the incomes of loan applicants. Credit union leaders hope the service will ease the strain on underwriting staff and streamline document-gathering — all while ensuring borrowers are who they say they are and make as much money as they claim.

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"Being able to offer leasing through our local dealers is a real plus for the credit union. … If it makes sense for our members, it makes sense for us to partner with CULA to begin offering the service to our members," said Douglas Sites, vice president of indirect and direct lending for Northeast.

Northeast Credit Union adds leasing option to fight rising auto prices

To counter multiple trends that are driving up auto prices, Northeast Credit Union in Portsmouth, New Hampshire, is partnering with the San Diego-based Credit Union Leasing of America to offer a new leasing option.

The $1.9 billion-asset Northeast began talks with CULA to adopt the fintech's indirect leasing system toward the end of 2021, after auto loan delinquencies among non-prime borrowers and refinancing activity saw significant increases industrywide. The partnership went live on June 1 of this year.

The credit union hopes that the new initiative will combat the effects of climbing interest rates on consumer lending markets and strengthen its position in the market, said Douglas Sites, vice president of indirect and direct lending for Northeast.

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BayPort Credit Union launched the "Get My Rate" tool on Sept. 4 in collaboration with SavvyMoney. The solution educates current and prospective members about their credit scores and what loan rates they qualify for without adversely affecting their credit scores.

How BayPort Credit Union is educating members about lending options

BayPort Credit Union in Newport News, Virginia, is giving members a new tool that shows them what loan products and rates they qualify for without negatively affecting their credit scores.

The $2.4 billion-asset credit union began exploring the "Get My Rate" solution in 2020 as part of its preexisting partnership with the credit score technology firm SavvyMoney in Dublin, California, which has been providing BayPort with its NCR Credit Score service for members since February 2020.

Using an external portal hosted by SavvyMoney but bearing BayPort branding, both external consumers and internal members are invited to input personal details such as their Social Security number and date of birth for a soft credit check as part of the prequalification process. Findings are then compared to the credit union's underwriting criteria to give the applicant all eligible credit products and associated rates, both from BayPort and other competing institutions, for review before formally applying.

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Jim Handley (left), chief credit officer for Sunlight Federal Credit Union, and Shivan Perera (right), senior vice president of participations and debt for Avana Capital. "We're a community credit union in a small, rural area, and the sheer number of deals and available business opportunities is not the same for me as it is for somebody in a bigger state or bigger market area," Handley said.

How a Wyoming credit union is doing more lending despite lower demand

Sunlight Federal Credit Union is working to grow its portfolio of commercial real estate loans by expanding the scope of available deals and mitigating the risks associated with entering new markets.

The size of the $200 million-asset credit union based in Cody, Wyoming, works against these efforts.

"We're a community credit union in a small, rural area, and the sheer number of deals and available business opportunities is not the same for me as it is for somebody in a bigger state or bigger market area," said Jim Handley, the credit union's chief credit officer.

To address this shortcoming, Sunlight is working with Avana CUSO, a subsidiary of the Peoria, Arizona-based Avana Companies, to gain insight into the pricing levels of potential deals relevant to the market and help broker both the sale and purchase of CRE loan participations across the U.S.

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Will Adams of Innovation Challenge sponsor Lending Tree and judges Julian Hebron, Sue Woodard and Robin Clayton address the audience at Digital Mortgage 2023.

Here are the top tech demos from Digital Mortgage 2023

Article published on National Mortgage News by Spencer Lee

New technology took center stage in late September for the innovation challenge at Digital Mortgage 2023 in Las Vegas, where 17 companies unveiled their new offerings in on-stage demos. Before a crowd of judges and potential clients and partners, presenters showed off the tricks of the tools aimed toward easing mortgage processes from customer acquisition to closing.

Tools on display ran the gamut from new loan origination systems to mortgage training programs, with a healthy dose of artificial intelligence thrown in the mix.

Apart from drawing newfound attention to their tools, cash rewards awaited for a win, place or show, as deemed by a judging panel consisting of Robin Clayton, Julian Hebron and Sue Woodard. The competition was sponsored by LendingTree.

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Blend debuts AI Copilot to improve mortgage workflow

Article published on National Mortgage News by Andrew Martinez

Blend Labs is launching an artificial intelligence tool that can process mortgage application data for a loan officer and ease communication between originators and borrowers.

The firm's Copilot platform can review a customer's financial profile, share pricing scenarios including closing costs, run the information through underwriting software and draft a pre-approval letter, said Nima Ghamsari, founder and head of Blend. The fintech debuted the tool on Sept. 12 at its customer conference, and will initially share it with clients through a waitlist.

"This is truly something that is there to help them do the thing that they would like to do, which is to help the consumer, and to do a lot of the manual work," said Ghamsari. "No LO wants to be spending a bunch of time going to seven different systems to answer questions that are common. They want to focus on the hard questions."

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Concept art of a chatbot, one of many core technologies employed by honorees on this year's ranking of the Most Powerful Women in Credit Unions.

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Beeline rolls out an AI chatbot named Bob

Article published on National Mortgage News by Maria Volkova

If you have a question about the mortgage process or a specific product, Beeline Loans' AI chatbot, Bob, will likely know the answer.

The bot, launched in early July, was in development for more than five months, according to Nick Liuzza, the CEO of Beeline. As conversations around ChatGPT and AI gained steam in the first half of the year, leadership at the digital mortgage lender believed having an AI-powered solution such as Bob would set it apart from the competition.

"In January, we started thinking how we can [make our platform] better and realized that 60% of our applications come in after hours or weekends, so that means people are shopping for mortgages when everyone's sleeping or on the weekend," said Luizza. "We can't staff the front end of our business 24/7 and this generation [millennials and Gen Z], they want 24/7 so that's why we built Bob."

Bob is "not a single AI but an AI orchestration system that ties together several AI's, with each specifically trained to do one task very efficiently to create one natural, rich experience," Luizza added.

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"It's going to be a rough year, so put your arms around your bankers because if they stick with you, you're going to survive," said Niamh Kristufek, head of U.S. business banking at BMO Financial Group, at left with Shawn O'Brien, consumer and business banking group executive at Atlantic Union Bank (middle) and Dee O'Dell, head of business banking sales at U.S. Bank.

Small-business bankers share their tech priorities

Deciding which technologies to invest in is no easier in small-business banking than it is anywhere else.

"It has been really tough," said Mark Pilotti, vice president in Capital One Financial's small-business bank. "There is a lot of testing. It's a moving target for us. We're trying to think about it as an omnichannel: How do I bring the bankers, the digital offerings, the branches together in a way that's relatively seamless to our customers?"

Pilotti and other small-business bankers shared some of their tech priorities at American Banker's Small Business Banking conference in Nashville, Tennessee, last month.

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"My dream was that people would come into central Florida and go, my gosh, where's all this solar coming from? And somebody would say, well, there's this cool little bank that's doing it," says Ken LaRoe, the founder and CEO of Climate First Bank.

Solar loans, tracking carbon footprints: Ken LaRoe pursues green goals

Ken LaRoe is undaunted by the momentum of the current anti-ESG movement, especially among the politicians in his state, Florida.

LaRoe — an entrepreneur, attorney and environmentalist who founded Climate First Bank in St. Petersburg in 2020 — is making loans to Florida consumers who install solar panels. He is also turning a fintech the bank acquired into a nationwide solar lender and a provider of an app consumers can use to measure the carbon impact of all their purchases.

LaRoe has worked at three banks — two community banks in Florida and the former SouthTrust Bank — and has founded three: Florida Choice Bank, First Green Bancorp and Climate First. The most recent de novos have an environmental mission.

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Jakub Porzycki/NurPhoto/Photographer: Jakub Porzycki/Nur

How mortgage AI chatbots stack up against ChatGPT

Article was published on National Mortgage News by Annabel Burba

Artificial intelligence-powered chatbots are popping up everywhere since the rise of ChatGPT.

Even in the mortgage industry, which is normally slow to change, things are no different: a Stratmor Group report found that 22% of lenders surveyed were using AI, either to court new customers, target current ones, or make better product offers.

Zillow and Redfin both created ChatGPT plugins that will allow users to search for homes with a conversation. InstaMortgage came out with a voice-activated avatar version of ChatGPT named Rachel. Several other mortgage companies released internally trained AI chatbots.

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