PERSON OF THE WEEK: As the mortgage lending industry rushes to leverage advanced AI, there are tenets that should be kept in mind to ensure a long-term sustainable roadmap for success.
AI can help lenders grow revenue, gain operating efficiencies, and ensure regulatory compliance – but the technology and tools are accelerating at a dramatic pace.
To learn more about how AI is transforming mortgage lending, MortgageOrb recently interviewed Sundeep Mathur, vice president fintech business, TAVANT.
Q: How should lenders wrestle through and prioritize amongst the assorted opportunities and areas to apply AI? What should the North Star be?
Mathur: Advanced AI is transforming industries by leveraging vast human knowledge and enabling natural language interactions. Unlike past tools, today’s AI solutions are revolutionizing the way the industry operates, offering immense opportunities to drive revenue, reduce costs, and ensure regulatory compliance. In lending and banking, the potential applications are vast—from improving marketing strategies to automating operations that currently rely heavily on human intelligence.
However, with a plethora of AI applications available, banks and lenders must carefully choose where to focus. As key players bridging Wall Street and Main Street, our primary goal should be borrower enablement. This means using AI not just for operational gains but for educating and empowering borrowers. By teaching them about lending and instilling confidence in their financial decisions, lenders cultivate more informed and active borrowers. A parallel can be drawn to the securities industry, where citizen brokers have significantly expanded market participation.
Ultimately, the guiding principle in AI application should be an unwavering focus on enhancing the borrower experience. Prioritizing AI solutions that empower and enable borrowers will not only lead to their success but also drive growth for lenders and the broader industry. By making borrower enablement the North Star, lenders can ensure that the integration of AI leads to long-term prosperity for both our customers and their institutions.
Q: What controls and measures do lenders have to ensure their AI solutions meet regulatory compliance requirements?
Mathur: Lending has always been a highly regulated industry, with rules designed to ensure the safety and soundness of borrowers, lenders, and the industry as a whole. As technology advances, particularly with AI, these regulations become even more crucial. While AI offers immense potential, it also presents challenges, especially when used by bad actors or when unintended consequences arise.
From the start, the focus on compliant and responsible AI has been a rallying cry for our society and industry. We’re witnessing a concerted effort from academia, the AI industry, and government bodies to ensure AI is developed and used responsibly. Regulatory attention at both state and federal levels is intense, with policies being developed to address critical issues like explainability, bias and discrimination, opt-out options, and human-in-the-loop alternatives.
Academically, the focus is robust, with over three million students studying AI, including over three thousand at the PhD level, dedicated to advancing safe AI practices. Meanwhile, the industry is investing heavily—between $100 to $150 billion annually—in expanding AI capabilities, building stronger foundation models, and enhancing controls and expertise.
These collective efforts have led to solutions like RAG (Retrieval-Augmented Generation) and Vector databases, which help anonymize proprietary information and secure personal data. The RAG Assessment Framework is another outcome, enabling us to evaluate AI models for accuracy, relevance, and safety. Such advancements ensure that AI-driven solutions are implemented in a responsible, safe, and compliant manner.
Q: How can lenders identify AI initiatives that deliver ROI?
Mathur: In lending, there’s a clear connection between IT spending and business growth. Traditionally, investing in technology has driven expansion, but today, IT spending has become essential for survival. The adoption of artificial intelligence (AI) marks a crucial shift. Lenders not actively pursuing AI solutions risk being outpaced, as competitors gain a significant edge through advanced AI capabilities.
While the cost of AI will eventually decrease, lenders must understand its value now. Waiting is not an option. AI can transform key business processes, offering opportunities that are too valuable to ignore.
To maximize AI’s potential, it’s important to identify where it can bring the most value. There are four key areas where AI excels:
Analyze and Summarize: AI can sift through vast amounts of unstructured data, providing insights and answering questions that would otherwise require extensive manual analysis.
Forecasting the Future: By analyzing past data, AI can create models that predict future trends, enabling lenders to make better, data-driven decisions.
Automate Actions: AI can bring intelligence to automation, allowing systems to make decisions and initiate actions, reducing the need for human intervention.
Content Creation: AI can generate new content from patterns in text, images, and other data, aiding in marketing, customer engagement, and product development.
Lenders must identify where AI can deliver the greatest ROI across their operations. From marketing to servicing, AI is already providing significant benefits. The potential is vast, and the time to act is now. Starting today ensures lenders are positioned to capture the full value of AI and remain competitive.
Q: ChatGPT seems very powerful, why can’t a lender just directly use ChatGPT withing their company?
Mathur: ChatGPT and similar large language models (LLMs) are undeniably revolutionary tools. These models have harnessed vast amounts of internet-based knowledge, enabling them to understand natural language, engage in logical reasoning, and deliver a conversational experience to users. The results are often impressive, with the AI offering quick, seemingly simple answers to complex queries. However, this simplicity can be deceptive.
While ChatGPT can provide responses to virtually any question, it is crucial to remember that it is doing “the best it can” to generate an answer. The model prioritizes delivering a response over ensuring absolute precision, in addition content shared with it becomes part of its learning process. For businesses, especially in the lending and banking sectors, deploying these tools requires a more rigorous approach.
In the mortgage industry, the stakes are high. Lenders must adhere to strict regulatory requirements, manage risks effectively, and ensure that AI is used responsibly. Securing proprietary policies, pricing, and customer data, such as PII, is critical. Moreover, providing consistent, accurate analysis and responses is paramount. Continuous monitoring is essential to identify and address any biases that could arise.
While ChatGPT is immensely powerful right out of the box, it is not always perfectly aligned with lenders’ needs. There is potential for it to create exposure or behaviors that require mitigation. That’s why expertise in leading tools and technologies is essential.
Using ChatGPT effectively is like owning a new smartphone—it’s only truly useful when personalized. Tailoring and fine-tuning these models to specific business goals is key to unlocking their full potential.