Tom showalter

Seven seconds is not a long period of time, at all.

There isn’t a lot of activity you can do in seven seconds.

However, if you have a background in NASA, aeronautics, and AI, you may be able to develop loan engineering software that could take out a loan in seven seconds.

And that’s exactly what Tom Showalter did.

Showalter, CEO and Founder of Candor, has developed a loan engineering system that can process an entire loan, performing over 9,100 intelligence acts, in just seven seconds.

“If you can imagine an underwriter doing over 9,100 changes, updates, additions, calculations, verifications and validations with external and third-party resources consistently on every loan each time they access the file, that would really be something. thing, ”Showalter said.

Showalter, a former C-level executive, spent nearly two years after the sale of the company he worked for interviewing executives in the mortgage industry. During these interviews, Showalter confirmed the challenges of closing time and maintaining quality, which drove the cost of manufacturing a mortgage from $ 5,000 to nearly $ 12,000. In addition, the highly manual process precluded the ability to scale immediately to meet market demands.

“So that’s a huge problem for them, and that’s the eradication of the margins. It used to be that they were gaining 500 basis points on their own, now they’re making 10, ”Showalter said. It’s not a good, healthy industry right now. This is the number one problem.

Another problem he discovered was trying to create a profitable layout, without cutting most of the workforce. Lack of staff would erode the quality of loans and lenders would shift costs from the beginning of the process to the last by losing money on the sale of the loan.

“You have a whole series of problems if the quality of the loan is not there,” he said.

Showalter said he and his team at Candor set out to create a technology solution to address these issues. With his background at Digital Risk, First American and CoreLogic, he aimed to help the secondary market obtain quality data and analysis on loan performance.

His challenge was twofold, as the platform had to be profitable, while offering a quality loan.

It is by testing a variety of business cases that the Candor solution would integrate two distinct sets of artificial intelligence and a Blockchain database.

Showalter said that one AI platform focuses on reducing costs, using robotics to perform low-value redundant tasks, while the second AI platform performs complex tasks, such as validating the accuracy of the data using external sources, reading and verifying pay stub data, verifying income, and then determining if the loan meets the eligibility criteria among all investors in ‘a lender.

Showalter said he relied heavily on his experience at NASA to create the technology.

“The same technology that is used to land a plane safely, will now land your loan safely,” Showalter said. “What this means is that we’ve found a way to use third-party data to corroborate income, assets, liabilities, home value, so that we can turn logical operations into a probability of defaults which will allow the lender to find out what types of defaults are found in these loans, if any. ”

Showatler, whose latest job at NASA was to develop landing procedures for the space shuttle, said the Loan Engineering System has three components: cost reduction, loan data integrity, and speed.

Additionally, Showalter said his team at Candor is keen to help grow the industry. Now, teams of people who could have worked on a loan can be “more productive” and redeployed upstream and used to grow the business.

Underwriters, if they used this new software, would be able to take on a “much higher level role” and could handle more loans. Showalter said the typical underwriter makes about 2.4 loans per day. The first tests of the software show the completion of 10 to 15 loans per day. There is also data that shows that the software can reduce the cost of creating a mortgage loan by $ 1,600.

“The loan is actually as good or better than it has ever been,” he said. “So they can redeploy it again to meet customer needs and ensure that everyone who is potentially available for a loan, wants a loan, is matched with the right investor.”

In describing the technology and speed of the software, Showalter noted that Candor controls a pay stub with a logic tree of 67 steps. “Does anyone think an underwriter has time to go through 67 steps to verify a pay stub?” I don’t think so, ”Showalter joked.

Another advantage of the technology is that it captures the entire loan underwriting history on an incorruptible blockchain database. Showalter said the Blockchain keeps a record of every action on the loan, such as changes in income, changes in property values, and changes in assets as the process is completed.

He added that once the underwriting history is complete, the aftermarket knows exactly where the data is coming from and receives a certification from Candor called “Candor Certified Loan,” which Showalter says is backed by a Lloyd’s of London buyback policy. to eliminate the risk of a lender buyout.

Showalter noted that while these technologies aren’t new, they’re new to mortgage lending, and it would take aerospace training to understand how to use them. It doesn’t hurt to have experience in psychology, statistics, and gain an MBA from Stanford University.

“You just can’t find too many people with that kind of depth and diversity in their backgrounds,” Showalter said. “We are doing something that is very difficult for the average lender to do. We’ve gone through almost every silo in building a mortgage. Everyone. We have all crossed paths with them.

Showalter spoke of the nearly two years of research and more than 100 interviews that went into the Loan Engineering System, adding that he “bought more dinners and ate more salads” than he got. remembered it.

However, he was able to gather information from a wide range of experts and shape their ideas into a product.

“Given the demands of their time and the call to immediately resolve today’s issues, I just don’t think the average mortgage executive has the opportunity to step back and develop a holistic solution,” did he declare.

The Loan Engineering System had a smooth commercial launch in April, which attracted several large companies. Candor says the platform is finishing beta testing and is expected to ship in October.