Latest / Market Pulse / Navigating Through Unpredictable Lending Challenges
Transcript
- Emmaline Aliff (00:40): Welcome everyone to a special edition of the Equifax Market Pulse podcast. We're recording here at the Equifax booth at NBA Annual 25 conference in Las Vegas where leaders from across the mortgage industry have gathered and where Equifax are exploring one big question, what happens next? I'm your host, Emmaline Aliff, and joining me is Matt Orlando, experience officer at Informative Research. Informative Research is a leading technology platform that delivers data driven solutions. Welcome. Matt Orlando (01:10): Welcome, and thank you. Emmaline Aliff (01:13): So let's just get it started right away. We're going to do a rapid fire one here with you. Let's go for it. So to kick things off with the big news that has everyone talking about FICO's new mortgage Direct Licensing program. From your perspective how will this program fundamentally reshape the competitive landscape for mortgage lenders and technology providers in the long term? Matt Orlando (01:38): Starting with a softball question. Huh? ? Emmaline Aliff (01:42): I'm a sports fan, so, Matt Orlando (01:43): Yeah, yeah, yeah. . So let's continue with the analogy, shall we mm-hmm . If this were a baseball game this thing is, we're in the batting cages in warmups. The dust has not settled. We don't know how this ends. There are, I think, several things that, that we're paying attention to. I think that dictate the success or maybe the road that this takes. Number one is overall cost of credit for lenders. Meaning what is the impact to the lender bill every month as they evaluate their cost of credit. We don't know what that means considering that this announcement just came out less than, less than a month ago. So that's kind of part one. I think part two is risk and the risk side is, is something that isn't as public right now as the cost side of the equation. So let's explore that a little bit. Matt Orlando (03:07): There's risk to the CRA community who are being asked now to generate credit scores. They've never done that in their history. There's risk to the lender receiving the credit scores. I think most importantly, there's risk to the mortgage market and to borrowers. You are moving the generation of credit scores from institutions that have been doing this for decades. Speaker 5 (03:36): Mm-Hmm Matt Orlando (03:36): . And now you're asking them asking it to be moved to a market that's highly fragmented more so than the bureau space. And you're asking them to generate scores in, in a manner that is accurate. That's a big shift in a short amount of time. Mm-Hmm . We don't know how that ends or how that process goes. And we don't know how quick we're going to get there. Matt Orlando (04:08): We have the GSEs and the secondary market, of course, to consider that are ultimately the buyers of these loans in how they evaluate these new parties generating the systems, or excuse me, the scores. So those two vectors, cost and risk, I think, have yet to really be fully uncovered in terms of the long-term implement implications of the program. So clearly there's a disruption in the credit supply chain and it's gaining a lot of focus. But the industry, the stakeholders, the policy makers have to get more data to understand how the dust settles ultimately in a manner that is tolerable for the mortgage market itself and the borrower community. What is the cost to the borrowers at the end of the day? Emmaline Aliff (05:15): Yeah, Matt Orlando (05:15): We don't know that. Emmaline Aliff (05:16): Yeah. So it sounds like we're, there might be some underestimation of the complexity and there's going to be different challenges for lenders and complications for borrowers. Is there anything else you would you know, comment on with, you know, for lenders? Navigate Quick? Speaker 6 (05:29): We got about five minutes Emmaline Aliff (05:30): Now. Speaker 6 (05:30): Okay. So Emmaline Aliff (05:31): Start. Okay. Maybe Speaker 6 (05:33): One or two more Matt Orlando (05:33): Questions. Perfect. Emmaline Aliff (05:34): Okay. Was there a specific one you want me to hit on? Speaker 5 (05:41): Sorry, do you mind? Mm-Hmm. Emmaline Aliff (05:46): So you covered those. Yes. Okay. Matt Orlando (05:48): Let's, Speaker 5 (05:49): Let's go here Matt Orlando (05:50): And kind of do a couple of these. Emmaline Aliff (05:52): Yep. Mm-Hmm . Okay. Speaker 5 (05:54): Whenever you're Emmaline Aliff (05:54): So, informative research has built a reputation around streamlining the loan process. Can you share some of the key innovations or service model improvements that have had the biggest impact on the lender efficiencies? Matt Orlando (06:10): Yes, we actually have a pretty exciting announcement to make here new, this will be the first time we're discussing it on this, on this podcast. Yeah. Congratulations. Yeah. The informative research in our parent company, Stewart has made a major investment in a company called gateless. Gateless is an automated underwriting engine and they help the mortgage community as, as their name suggests automate what is a pretty manually intensive process right now. This is critical in a market environment where rates are potentially decreasing. You're looking at potential growing demand. So how do lenders respond? Do they just simply hire more or do they survey the evolving tech landscape and ask themselves if, if there is a place for a newer technology to help with the potential capacity demand that's coming? Matt Orlando (07:23): Gateless is a solution that allows for folks to grow their capacity without necessarily growing a commensurate number of, of their labor force. This is significant. Going back to the earlier question about the role that credit providers play traditionally a lot of us just think of a lot of people think of us as simply providing a credit report when the order button is placed. With this investment, it's now clear the CRA community is evolving from that provider of credit reports to a technology play that helps lenders make decisions. This investment here is about how far do those decisions go, do they extend into the underwriting process to help make lenders more efficient? Something we're exploring right now. And that's part of the evolution of the credit space as the disruption in the in the credit supply chain continues. Emmaline Aliff (08:35): It sounds, sounds like you're, you have congratulations on addressing a different level of scale. Thank you. That's you know, for the market. We're done two minutes. Right? Okay. Matt Orlando (08:46): Thank you. Emmaline Aliff (08:47): Okay. Speaker 5 (08:57): . Emmaline Aliff (08:58): Okay. So maybe you can just, you know, describe, you know, This will be one last question, so then we, we can close out What's next for data-driven decisioning in the origination process with all of that, the things you've just described? Matt Orlando (09:21): Data should be thought of as more modular and should be thought of as delivered in a just in time modular fashion. That's commensurate to the cost tolerance of the lender, given where that loan application sits in the process. The earlier in the process, the less tolerant that lender is for cost and therefore, what pieces of data while valuable are in line with the lender cost expectation. And how do those pieces of data allow that lender to get to a yes no, that ultimately serves the borrower in the best possible manner. If it's a yes, it looks like we're on track for home ownership, you know, the home ownership dream, if it's a no, that's also very good to know early on in the process because it sets expectations and puts the lender in the position of an educator to help that borrower understand what they need to do next to improve whatever conditions prohibit them from getting that home. Emmaline Aliff (10:45): Well, thank you so much. You know, appreciate all the things you've shared specifically around finding new ways to get to scale and the critical role that you're playing in this ecosystem. So Matt, thank you again for joining us live here at the Equifax podcast booth at NBA Annual25. It's clear that the future of mortgage lending isn't just about faster technology. It's about smarter data fraud, resilience, and a better experience for both lenders and borrowers. Matt Orlando (11:10): Thank you very much. Thank you. It was a pleasure.