Suitability Logic: Jorge Ponce and Corey Smith of FirstClose on the Technology Outlook
By MBA Insights Staff
February 25, 2019
Jorge Ponce is Director of Product and Vendor Management with FirstClose, Austin, Texas. He has more than 15 years of experience in bank operations, mortgage and risk-based consumer lending and is responsible for driving adoption, client communication and product development. Corey Smith is CPO of FirstClose. His more than 25 years of experience in business spans sales, marketing, finance, strategic planning and risk assessment and management. As CPO, Smith is responsible for overseeing user experience as well as product management.
MBA INSIGHTS: What are some technology advances that lenders can expect to see in 2019?
JORGE PONCE, FIRSTCLOSE: In 2019, lenders have access to more property data than ever before. With more and more counties coming online, there is more access to information about a property. This can include property history, property characteristics, or a number of other records and data points that are important to lenders.
This access to information means lenders have more intelligence when it comes to a given property. Simply put, this data is giving lenders a better picture of what they are working with. For 2019, lenders can expect to see even more data, as well as more tools for analyzing that data and how to leverage it to maximize business strategies.
INSIGHTS: What is ‘suitability logic?'
COREY SMITH, FIRSTCLOSE: Suitability logic is the result of this increased access to data. Suitability logic is a process in which a program can be taught to make decisions about the best classification of valuation or title search products for any given property. For example, the program analyzes the available data about the property and decides which method of property valuation would be suitable under the given circumstances. This logic looks at all the necessary data points to determine if an automated valuation model (AVM) would be best, or the data may recommend a desktop valuation instead. If the property is considered more complex, it may recommend a drive-by or full appraisal.
The same goes for title work. If there is not much property data available from the county's electronic records, suitability logic can automatically order a manual property report instead of an automated one, so that lenders are able to get things done right, quickly and accurately the first time.
PONCE: Suitability logic analyzes data and makes decisions for the lender about what course of action would be best or makes the most sense for a certain property. The reason this works is because there is so much data available today. Being able to use that data to make intelligent, informed decisions is what suitability logic is all about.
This takes the guess work out of the equation for lenders and keeps them working efficiently since they do not have to waste time and money on the wrong course of action. Unfortunately, lenders too often must guess which type of valuation model or title search would be best. The outcome of that guess being wrong can be both costly and time consuming.
Lenders might spend a good portion of their time reviewing the results of an AVM for a property that ends up needing a full appraisal. In this case, they have just wasted their time and money on work that has to be redone. Suitability logic takes out the guessing and makes intelligent decisions from the data it has been given.
INSIGHTS: How does this differ from regular automation that lenders may already be using?
PONCE: The important thing to know about automation is that it is based on a product. Where there are many products out there that automate certain processes, suitability logic is a process that helps lenders determine which of those products would be best. The intelligence available through suitability logic intercepts that step and provides automation before you even arrive at a product.
Suitability logic, by helping lenders arrive at a product faster, saves time and money, because they are able to choose the right solution the first time around.
SMITH: The key difference is that suitability logic is intelligent. Many times lenders go in blind and have to guess what type of automation or product would be best for them and the property that they are working with. This keeps lenders from having to throw out work they've done and start over, wasting time, cycles, and money.
INSIGHTS: What changes will this type of automation create in the industry?
PONCE: This will certainly make the industry more competitive. This type of intelligent automation has the potential to change the way lenders think about fulfilling loans, because it could be the key difference in a borrower choosing one lender over another. The time and cost saved by using suitability logic will definitely make the lenders who use it more attractive to potential borrowers.
SMITH: The cost and efficiency gains will definitely make lenders more competitive. Those time and efficiency gains are also benefits that can be passed on to the borrower. Lenders who embrace this technology will gain a competitive edge over those in the industry who may not be using it.
INSIGHTS: What gives suitability logic "staying power?"
PONCE: Suitability logic is the way of the future. This ability to interpret data and determine the best course of action in real time is raising the bar in the industry. This idea of increased intelligence around property data and the changes it will afford will cause the industry to think about what they can do with this data, how they can improve upon automated decisioning like suitability logic, and how they can approach lending in the future.
SMITH: Suitability has staying power simply because of the competition it creates within the industry. Suitability logic will stick around because lenders will have to start using it if they expect to stick around. As a result of this, suitability logic has the potential to become the new standard for the industry.
INSIGHTS: Will these changes enable better regulatory compliance?
SMITH: This technology is built to mimic a lender's current loan fulfillment and underwriting guidelines. Assuming a lender is already compliant, it can help them document that compliance by providing a clear picture of the data factors used to make decisions on the loan.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)