00:00Live from Las Vegas, I'm Diego Sanchez, president of Housing Wire, and I'm joined this morning by
00:15Seth Hooper, the chief product officer at Mortgage Cadence. Seth, it's so great to talk with you
00:20today. Yeah, it's great to be here. Very excited about everything that's going on in our industry
00:24and great to be here in Las Vegas and be able to talk to all of our clients and other lenders
00:29in the industry. Yeah, so tell us about that role, chief product officer at Mortgage Cadence.
00:34Yeah, so I've been in this industry for 25 years, been with Mortgage Cadence since about
00:412010, and what I'm responsible for is I oversee both the strategy and product here at Mortgage
00:48Cadence. And AI is a big buzzword in the industry. It has been for a couple of years now, but Mortgage
00:55Cadence has chosen to hone in on the intersection of AI with compliance and regulatory issues.
01:03Tell me about that focus. Sure. So, you know, what really excites me here at Mortgage Cadence is that
01:08I'm able to solution and deliver innovative products for our clients. So we have clients that
01:16do everything from conventional to government lending to reverse mortgage to DSCR, high net worth
01:24lending, so a variety of products. And so I really enjoy working with those clients. And when it comes
01:31to the AI component, the reason why we're so focused on the innovation, the crossroads of innovation and
01:38compliance is because mortgage is a highly regulated industry. So it's really existential that there's
01:45audibility and traceability that's built into that product so that when you deliver those solutions,
01:50it's not an afterthought. Yeah. And it's crazy. I feel like every couple of days, we're moving forward
01:56a year in AI time. And it's far outstripping what the regulatory bodies and what national legislatures
02:07and state legislatures can keep up with. Yes. So how do you help lenders stay compliant when AI is
02:15innovating so quickly? Sure. You know, a lot of lenders will say, or people in conversation will
02:19say, what's the best model to pick to make sure that you're staying on top of those things? And I say,
02:25really, the first thing you've got to look at is you've got to start with your governance and your
02:30governance policies, because you've got to ensure that they are robust and thorough enough that they're
02:37adopt as those models or AI changes. So, you know, some of the key tenants of that is going to be
02:42the proportionality of it. What is the, you know, you've got to go through and you've got to
02:47really rank and put your AI usages into different asset categories, because there's going to be
02:53things that are going to be more assistive, like in our platform, helping a user navigate to a specific
02:59page or, you know, on how to put additional data field in versus things that are going to be
03:05impacting that credit decision. So if it's credit impacting, you've got to have much stricter
03:10oversight and policies around that than, say, you know, assistive. The next thing that comes after
03:16that is you've really got to make sure you've got transparency and explainability in the system.
03:23By explainability, you've got to make sure that you know how the decision was made by the AI
03:28in human language and terms, like in business terms. Why did it make that decision? And then
03:33that traceability to make sure how did it come to that decision? And I think the last two things
03:38that you've got to make sure you've got in there is you've got to have the ability to make sure it's
03:42got audibility where you can go in and audit that because models change all the time.
03:46You've got to know, is that based upon GBT-5 or, you know, what's going to come out in the future?
03:52GBT-6 or whatever comes out, you've got to make sure you understand that you've got a framework that you can
03:57rerun that decision as it was at that point in time. The last thing is you've got to make sure that your
04:03policy's got validation. You've got to make sure you've got a human in the loop and a governance model
04:07to make sure that you know what your teams are implementing or, you know, what models are they using?
04:12Are they open or closed? Things like that. So you've got to make sure it's got those five key
04:17tenets of that governance policy to make sure you're staying on top of things.
04:20Yeah. Walk me through. You've been in the industry for a while now. Walk me through how you would advise
04:26a lender who is maybe looking around for a new technology and compliance partner. What should they
04:34be looking for? Sure. When you're looking for a partner or a provider in the industry, you've got to
04:41look at what is that provider's governance policy and does it align with what your policy is. Typically,
04:48lenders are going to have a questionnaire that they're going to go through and make that provider
04:51fill out and make sure it aligns. And some of the key things you're looking for are what model are they
04:58using? How often is that model updated? But more importantly, how does that vendor communicate updates
05:04out when that model is done? Do they have an open or closed model? Is that lender's data going to be
05:10used as part of that process for training purposes? So you've got to ask your vendor, how are they going
05:15to handle these situations? How are they going to take your feedback and improve that into the system?
05:22Lastly, you've got to ensure that how is that vendor keeping track of your key privacy attributes of your
05:35consumer? Because there's going to be more and more biometric data and things like that to make sure
05:39how are those being protected? So in your role as chief product officer, how are you balancing
05:46innovation with compliance? And then how are you sharing that balance with your team and then
05:53helping them share that balance with mortgage cadences clients? You know, I've got a passion
05:59for compliance. And, you know, a lot of people look at, well, what is the purpose of that compliance?
06:05What is the purpose of that governance? And they're saying, well, it's to protect consumers.
06:09But historically, you know, the protection of consumers has kind of hindered speed and innovation
06:16and the time you go. And I look at it as really what you've got to do is to say,
06:22how do we align those things? In business, a lot of times expectations aren't set right because you've
06:27got misalignment. And really what you want is you want alignment with the consumer and the lenders
06:31and the lenders and regulators. And what do they want to do? I think the goal is these borrower-centric
06:37outcomes where we're focused on making sure that the consumer has transparency on what they're
06:42getting. They understand what they're purchasing. They want speed, right? Nobody wants to sit around
06:49for 40 days to get a mortgage. They want to be able to get that as quickly as possible.
06:53And they want to have a really good experience doing this because at the end of the day,
06:56it's about a home that they're either purchasing or, you know, refinancing. So it's a very big decision.
07:02So by looking at compliance from that lens to say, how can we bring in,
07:06you know, speed and safety with that same alignment to get that overall goal? By taking
07:14that lens of it, I think people look at it and say, oh, this is a really positive thing
07:18and something that we can work together on versus just being, oh, it's compliance. We have to do it.
07:23Right. So move fast, but this is mortgage. So maybe you shouldn't break things.
07:28Yes, absolutely. You've got to make sure that you've got the speed in there, but you want that
07:36safety aspect of it. And so you've got to make sure that you've got the transparency with everything
07:41you do. So your role, I would guess you get to look ahead and think about what the future is going
07:48to bring and how it's going to impact your clients. What do you think about the future of
07:52mortgage and mortgage cadence's role in that future?
07:56You know, when I look back, when I got in this industry 25 years ago,
08:00things were still very much a paper business. Everything was printed out. They had
08:04file folders that they would wheel around between desks to do things.
08:08And, you know, our focus has been, how do we get to a digital mortgage as quickly as possible?
08:14And I can see now, and there are certainly aspects in the industry today where there are certain
08:18boxes, small little boxes where certain loans will go through the system very quickly,
08:23where you've got a fully automated HELOC. You've got certainly situations where you can have
08:28a pretty automated conventional loan. But I see that box expanding where the majority of the market
08:33is going to have a fully digital experience that's really going to bring down the speed it takes to
08:39get a mortgage. And here at Mortgage Cadence, we've really been focused on
08:42how do we make AI and our LOS system really plug and play? We want it to be as easy as taking a USB
08:53cord and plugging it into your laptop so that we can really enable lenders to do what they do best,
09:00which is work with their consumers and, you know, serve those clients, but be able to plug in the right
09:06frameworks that they want to use to really differentiate themselves from the competition. We know there's a lot
09:11of competition in this market space, and that each lender knows what's best for their clientele to be able
09:17to focus and grow their business. And we want to be there to support that growth.
09:22Well, Seth, thank you so much for joining me today. I think we've had a really interesting and productive
09:27conversation about AI, Mortgage Cadence, and your role in the future of mortgage. Again, thank you so much for joining me today.
09:35All right. Thank you so much.
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