Candor Introduces First Loan Scoring Engine
November 1, 2021
Candor Technology introduces loan scoring engine
November 4, 2021

Interview: The Institutional Risk Analyst

Tom Showalter on Perfecting the Lending Process

R. Christopher Whalen of The Institutional Risk Analyst sits down with Candor CEO Tom Showalter

The industry has spent billions on robotic systems that automate what is still a largely manual process. Loan underwriting is too complex, too variable for such an approach. That’s why we decided to apply the basic tools of behavioral science to underwriting mortgage loans.

October 18, 2021

The US mortgage industry has just been through the best 18 months in terms of volumes and profitability in a decade. As we head into 2022, the old issues of managing expenses and scalability come back into focus. Many firms are already selling servicing assets to raise cash, a sure sign that profit margins are getting tight. Other firms are buying servicing at record prices to perhaps capture refinance opportunities. Successful firms must find a way to achieve cost savings in heretofore sacred parts of the mortgage factory such as loan underwriting, which is the most costly and also important part of the lending process. But every loan is different. A typical loan has literally tens of thousands of variables that an underwriter must navigate on the pathway to approval. Most firms have error rates for loan underwriting in low single digits. To be successful in 2022 and beyond, mortgage lenders must move that error number a couple digits to the right of the decimal point. In this issue of The Institutional Risk Analyst, we speak with a revolutionary in the world of lending, Tom Showalter, Founder and CEO of Candor Technology.

The IRA: Tom, you started Candor back in 2017 to solve several problems with the loan manufacturing process. You identified rising costs and shrinking margins, a high error rate in underwriting with the potential for bias, and as a result, a poor experience for the consumer. Talk about how you came to this vision.

Showalter: Prior to joining the mortgage industry, I worked for NASA in the aerospace industry. The mortgage industry has huge amounts of complexity and spends aggressively on technology, but has yet to see that technology spend returned in the form of increased productivity and profits. I began to think about how we can transform the process of manufacturing a loan into something closer to the zero-error tolerance world of aircraft and space travel.

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