NPLA Meeting Recap: Fraud Prevention in Lending

Recap and Insights provided by James Martin, VP of Operations at GoDocs

Market Update with Jon Hornik

Currently, we find ourselves in a unique situation. The economy is slowing, yet unemployment remains low, and inflation is higher than the Fed’s target at around 3.6% to 3.7%. The Fed decided to maintain the federal funds rate target between 5.25% and 5.50%, which is still considered restrictive for economic growth. However, they announced a reduction in the roll-off of quantitative tightening, meaning they will decrease the rate at which they purchase and hold treasuries (not mortgage-backed securities). This move is expected to stabilize and eventually lower long-term interest rates, which should benefit businesses and individuals alike.

Experts predict that the Fed may still cut rates later in the year, but this depends largely on how the workforce and unemployment statistics evolve. If unemployment remains resilient, the Fed may be hesitant to cut rates. Additionally, with the upcoming presidential campaign in November, there’s always the political factor to consider.

FundingShield: Cybersecurity and Fraud Prevention in Lending

During the meeting’s main presentation, Ike Suri, CEO and Chairman of FundingShield, delivered insights into the challenges and solutions associated with cybersecurity and fraud prevention in the lending industry. Drawing from his extensive experience across diverse industries, Suri emphasized the unique complexities of the mortgage industry and the need for innovative solutions to address cybersecurity concerns effectively. It was out of this necessity that FundingShield was conceived, with a mission to manage cybersecurity and fraud prevention by harnessing real-time data to streamline transactions while upholding safety and compliance standards.

FundingShield’s approach focuses on cutting down processing time and laborious tasks through a simplistic yet secure and seamless process. Suri stressed the importance of scalability and affordability, noting FundingShield’s ability to process billions of dollars worth of transactions each month.

FundingShield’s products and services, including wire fraud and title fraud security solutions, are integrated into numerous platforms and accessible through API-driven, data-centric processes, providing a comprehensive solution that addresses the evolving cybersecurity landscape.

Managing Risk in a Dynamic Market

Adam Chaudhary, President at FundingShield, delved deeper into the intricacies of managing risk in the lending industry, particularly in the context of wire and title fraud. Chaudhary highlighted the increasing prevalence of cyber fraud schemes and the challenges posed by disparate parties involved in real estate transactions.

He emphasized the importance of cyber hygiene and compliance standards, such as SOC2, in mitigating risks and ensuring regulatory compliance. Chaudhary discussed the impact of data breaches and ransomware attacks on financial institutions, emphasizing the need for proactive risk prevention strategies.

Q+A Session with Jon Hornik:

Jon Hornik: What are your value adds?

FundingShield: Our value-adds focus on reducing time and costs associated with laborious tasks that many lenders cannot afford or choose not to undertake due to risk capital constraints. Automation and simplicity drive cost savings, while technology enhancements like RFID integration can boost efficiency by up to 500%. We verify critical data elements at the source, such as licensing, insurance coverages, and permissions, ensuring accuracy tailored to each transaction.

Jon Hornik: Do you issue a policy?

FundingShield: Yes, we do. Before issuing a policy, we ensure thorough verification and remediation to address any potential issues, saving time and costs for our clients. We’ve observed the challenges posed by traditional Representation and Warranty insurance policies, often creating additional layers of complexity and expense. Our approach focuses on providing precise coverage tailored to the actual risks faced by our clients without burdening them with exorbitant costs. Our fee structure is designed to be reasonable and can be integrated into the deposit structure of the loan, ensuring affordability and transparency. In the event of a claim denial by the title insurer, our warranty covers losses on a second-loss basis, offering additional protection and peace of mind.

Jon Hornik: Do you offer customizable service packages?

FundingShield: Absolutely, we offer flexibility in service selection. While some clients prefer comprehensive solutions, others may opt for specific services like bank account verification. Our goal is to provide scalable and affordable options tailored to individual needs. We understand that not all lenders require the same level of service, so we ensure that our offerings are adaptable to meet varying requirements and budgets.

Jon Hornik: How do you ensure operational efficiency for smaller lenders?

FundingShield: Our technology is fully scalable and adaptable, catering to lenders of all sizes. We’ve designed our solutions to be approachable and affordable, with minimum commitments aligned to loan volumes. Through a combination of technology and human touch, we expedite the review process, with 85% of loans completed within 24 hours and 99% within 48 hours.

Jon Hornik: Where does FundingShield fill in the gap between various lawyer and title policies?

FundingShield: FundingShield plays a crucial role in ensuring that all parties involved in a transaction are accurately represented and adhere to regulatory requirements. While traditional lawyer and title policies provide a level of assurance, we recognize that relying solely on face value can leave gaps in coverage. Our comprehensive verification process goes beyond surface-level assessments to identify potential issues that could jeopardize the integrity of the transaction. In nearly half of the cases we encounter, we uncover discrepancies that our clients deem critical enough to halt the deal until remediated. Our goal isn’t to obstruct transactions but rather to ensure that all entities involved adhere to regulatory standards.

Jon Hornik: How do users know a transaction has been validated by FundingShield?

FundingShield: We offer various validation methods, including portal access, integration with loan origination systems, and issuance of certificates. Our certificates provide detailed verification data and our commitment to warranty coverage, ensuring transparency and accountability in every transaction.

Jon Hornik: How does FundingShield stand behind its product?

FundingShield: We stand behind our product through a multi-faceted approach. Firstly, we provide a transaction-level review verification certification, ensuring that each aspect of the transaction is thoroughly assessed and verified. Additionally, we maintain an insurance portfolio that meets the stringent requirements of our largest lenders.

Jon Hornik: Why engage with title companies despite potential conflicts?

FundingShield: Collaboration with title companies serves mutual interests. While there may be tensions, they recognize the value of our real-time data access and verification capabilities. Many are embracing technological advancements and view us as complementary rather than competitive. We’re bridging gaps and enhancing industry standards together. Our engagement with title companies goes beyond mere transactional relationships; it’s about fostering a culture of innovation and collaboration that benefits all stakeholders in the lending ecosystem.

With cybersecurity risks on the rise, initiatives such as those presented by FundingShield are crucial in safeguarding lenders and borrowers alike against fraudulent activities. As the industry continues to adapt to changing economic conditions and regulatory requirements, collaborative efforts and proactive measures will be essential in ensuring a secure and resilient lending ecosystem.

Author Bio:

GoDocs is an innovative leader in automated loan document generation, transforming the commercial lending process. With a fully cloud-based platform, GoDocs provides a flexible digital solution that makes commercial loans more cost-effective to document and faster to close, all while maintaining compliance in all 50 states. GoDocs is a Corporate Member of the NPLA.

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