[Alice] Allen Pollack, Consultant and Tax Expert what have you got for us today, Allen?
[Allen] Good to be here, Alice. Couple different things. It’s nothing too crazy. I’m gonna skip over some of the things I think TransUnion lowered the cost of testing Advantage scores, and everybody’s talking about the legalities around compliance and such things that we brought up. But let’s get into a couple fun things about AI and the mortgage industry. Rob Crismon, by the way, had a very funny joke. So if you haven’t seen his newsletter today or over the weekend, you wanna go check that out and he said something pretty funny, so Rob had an editorial over the weekend it was his own AI editorial saying, “Waiting is a strategy, not just a winning one,” having to do with implementing AI in your own organization. A-and really he says the biggest mis-misconception in mortgage AI is that companies should wait for regulatory certainty before acting, but that certainty is unlikely to arrive the way that executives hope. And what he’s saying is as federal agencies continue to refine their position on AI, states are also pursuing their own approaches, and the frameworks remain unsettled. Meaning you, the lender, are going to face overlapping, sometimes conflicting regulatory layers. So sometimes waiting is a strategy, but not the winning one, and that’s ultimately what he’s saying here. He says two more quick things in summary. He said that, “Organizations that build thoughtful AI governance while the rules are still taking shape will emerge stronger than those waiting for every question to be answered.” And he says, “AI governance is an organizational capability, not a compliance checklist.” So you need to understand how AI is used, document the reasoning, and establish oversight and revisit continuously. And he even noted a couple things over that, MISMO on August 24th, they have an AI governance workshop which is coming and you… and a hands-on training you should take a look at. I will tell you, Alice, that my technology platform, which is Cenze, we are working with two lenders right now. One of them we just submitted a 13-page AI governance document, and in that document we had to identify every single touch of AI, what data is sent to any type of AI engine, whether it’s local or not, how the data’s encrypted. And just as an example for the folks listening, if you’re talking with vendors, we at my own company, we actually encrypt the data because the AI engine doesn’t care what someone’s name is. it doesn’t care what the address is. So we either remove the data and put a token there, meaning like street address was here, and then we replace street address back when the data’s coming back from the AI engine. Or what we do is we completely take out the name and address. So make sure you’re thinking about, like Rob said, what is your own AI governance. You can come out stronger by putting a policy in place. And, you can use AI to review it. It’s not that if someone submits you 13 pages, you have to read 13 pages. There is no official AI expert, meaning no one on your staff is gonna be that expert, but you wanna make sure that, you are starting this process. If you want to know more, you should read Rob’s editorial on that from this weekend. That was a great one. Alice, any questions before I move on?
[Alice] I do have one because I wrote a lot of policies in my life. That was a big part of our business, Yeah … my consulting business and what we help with. So is that something you will help people with if they say, “I just simply want to understand what you would think should be in the governance policy”? ‘Cause I completely agree with the concept of we should not be holding ba- There’s no such thing as certainty from a regulator. That’s not gonna happen. It doesn’t happen- … in the regs we have today ’cause usually spend a lot of time litig- setting their guidelines by litigation enforcement actions that they take. We haven’t– I know they’re promising to turn around and be more forward, but that’s, we have been stung a lot of times by a certain process and we’re used to that, and that’s what we are waiting to happen. We don’t wanna be the person out in front. I get that, but this seems to be a different world if you are touching the right bases. We know what their security pinch points are for P- PPI anyway, and so just protect those. And Allen, it sounds like you got a handle on that.
[Allen] Yes, that’s correct. So yeah, you can reach out to me. I’ll say my email address now and I’ll say it again at the end of the segment, but it is Alan, A-L-L-E-N, @tms-advisors.com. And I can help you either find somebody that is an expert or a self-proclaimed expert or just some of the right practices that you should be looking for. And if you’re a vendor same thing on how to actually secure yourself. Appreciate you bringing that up, Alice. Thank you. Now, let’s talk about some other quick little things in the news here that were worth mentioning. Sagent, by the way they’re, they call it Dara or Dara, D-A-R-A. Depends how you… if you’re from the northeast or if you’re from the south. But they’re servicing platform. Check this out. It’s called Bring Your Own AI Agents, BYOAA. And so what their president just said in in National Mortgage News, he argued that the future of mortgage servicing belongs to the platforms that are compatible with the servicer’s own AI strategy, not the ones that lock you into their AI. So yes, it’s marketing spin, but I’ve not yet seen anyone say anything like this, that, you wanna use our technology, bring your own AI. And they’re rolling this out, this capability. Servicers can now bring their own AI tools and plug them directly into the platform rather than being forced to use the ones that come in Sagent’s platform. They have AI-powered compliance right inside of Dara that can shrink regulatory response times from weeks to hours, and you wanna go check that out. And then I have this is really important. I hate to bring up this topic because sometimes it can sound negative, but it’s absolutely critical. It’s called Shadow AI. And Alice, what this no one’s talking about It’s when you have loan officers, you have employees, you have partners, you have people that are directly part of your organization- ization or have access to data in your organization, and they’re not officially sanctioned or governed. And what they’re doing is they’re using that AI to touch all your data. They’re using that AI to talk to your customers. So it’s called shadow AI. It is a real challenge that’s going on in the industry. Even Brian Viewe, the president of MISMO, has an entire piece talking about this and AI governance. The uncomfortable reality, by the way, is that your loan officers are probably already using ChatGPT, Copilot, and many other tools in their daily workflow. And your compliance team may not even know which ones or how. So keep that in mind. It’s called shadow AI. And then I just have one last thing, Alice, that I wanted to say. I’m gonna… This will tee off for next week so we can get some time for Mark and one of his awesome rants. But think about this, folks. The real question nobody is asking, if AI makes your shop 30% more efficient, but the market contracts 20%, was it a good investment? And we can talk more in detail about that next week.
[Alice] Okay. That’s a great one to tee up. I also would love to get your thoughts on what lenders are doing about shadow AI. So if they find out it exists out there, is there a tolerance for it? Do you put guidelines around it? Do you prohibit it altogether? I’d love to get your, more detail on that for our listeners.
[Allen] Yeah. I’ll give you a really quick answer ’cause that’s a pretty deep one, and I’d actually love to get feedback from the rest of the group too. But on the quick side of that, Alice it’s a double-edged sword for some people that manage their employees and loan officers and even brokers through their TPO channels because- They don’t wanna lose those employees, and there seems to be people hopping around, whether they have their own branch or they’re independent retail. They’re hopping around because they wanna find the companies with the best tools and with the best technology or the ability to bring in the best technology. But lenders are getting really tired of everybody. They’ve got 12 CRMs, and they’ve got three pricing engines and they wanna consolidate and have one tech stack, so to say. So it’s a double-edged sword at the moment, Alice, about how you handle that and who you open it up to. But it’s definitely a deep philosophy type of response and question to think about
[Allen] Oh, yeah. My first response, or I think when we talked about it a few weeks ago, was you know what? If they use data, take it out of my system. If I’m the owner and they put it in their system, I’m pretty sure that’s a violation of my employment agreement with you.” And so I have it pretty- Yeah … firm-handed when it first came up. But, Absolutely … there may be a need to talk it through if it’s done on the up and the loan officers are asking and, or people are asking on how I can leverage it. Okay, thank you.
Allen Pollack
, Chief Operating Officer, Tech Consultant
Allen Pollack, a Mortgage & Financial Services Technology Advisor, is a subject matter expert in the mortgage origination process along with software product management and software development.
In today’s financial services push to all things Digital, Allen has been helping lenders and financial services solution providers align their digital transformation and technology strategies by removing the human element of risk, and automating processes that drive efficiencies and margins into profits.
Over the course of his career, Allen has co-created and developed technology business models that have birthed highly successful, innovative solutions and companies.
Allen co-founded and served as CTO of New York Loan Exchange (NYLX), a loan product eligibility and pricing engine (PPE) that made an immediate impact on the industry, scaling the company quickly and forming partnerships with multiple mortgage and financial lending companies. In 2012, Allen was a co-founder of a merger between NYLX and Aklero Risk Analytics that created LoanLogics, A Mortgage Loan Quality and Performance Analytics company. Allen served as CTO where he continued to bring new and innovative product solutions to the market that made a significant impact to mortgage lenders that reduced risk, scaled business channels, and grew profits in a very competitive and highly regulated market.
Allen is also is mortgage and finance technology contributor on a weekly live industry podcast, Lykken on Lending, and is launching a new podcast soon to be released, TechStack Radio, dedicated to technology and innovation in Financial Services.