MReport December 2021

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 17 EXPERT INSIGHTS Thomas Showalter, Founder and CEO, Candor Technology T homas Showalter is Founder and CEO of Candor. He has held a variety of key executive C-suite executive roles over his years in the industry across a variety of firms, including Digital Risk, CoreLogic, First American, Loan Performance, Experian, and several boutique data and analytics firms. Showalter's background also includes a stint at NASA, where he developed a variety of aero- space technologies for use in civilian and military aircraft, as well as the former Space Shuttle program. Candor recently announced that it has secured $12.5 million in a Series A investment, a move made to further enhance the company's patent-pending Loan Engineering System, designed to conduct a full-file credit risk as- sessment, and make income, asset, and lending decisions, backed by a defect policy. Behind Candor's Loan Engineering System is its own Mortgage Decision Science, a specialized form of machine intelligence to analyze problems, take steps to resolve problems. Candor's Mortgage Decision Science technology leverages a patent pending logical infrastruc- ture comprised of nearly 40,000 decisioning steps. MReport recently had the op- portunity to chat with Showalter about how this infusion of capital will benefit Candor, advancements with its Loan Engineering System, and the customer base they serve. How did Candor's latest round of funding come about? O ver the past two years, we were approached by several investors. Very few understood the full possibilities of our Loan Engineering System (LES). The few that did were more inter- ested in quickly running up our value, and reaching a liquidity event. That's what made dealing with Arthur Ventures so appeal- ing. Arthur Ventures is an early growth capital firm that leads investments in B2B software companies located outside Silicon Valley. They share our desire to bring profitability and transpar- ency to mortgage manufacturing. Explain Candor's LES and how it differs from others in the field. T he biggest differentiators of our LES from the others are: our LES makes decisions; it's not an underwriter workstation; we back our decisions with a defect policy; and we score all data and determine a "Strength of Underwrite Score." Every other solution provides recommendations or findings back to the underwriter who must review, confirm, validate, and manipulate the data to decide what the final decision should be. That methodology increases the reliance on people, and the pos- sibility for error and bias. Our LES makes the final credit risk decisions, including income, assets, liabilities, and identity, and finally, the decision to lend. All data is put through a rigorous, dual-phase scor- ing system to provide complete transparency into the quality of the data, and the "Strength of the Underwrite" is scored. How was your AI developed, and how is a product like LES upgraded? O ur LES wouldn't be "up- graded" per se. That said, the capabilities are expanded monthly, as we continue to increase the number of Pivot Points in the underwriting decision technology. Currently, there are more than 40,000 pivot points. We will also expand the programs that can be run through the system to include government loan (coming Q 4), jumbo, and non-QM. We will soon unveil some added features that will allow our clients to tap into never-before manufac- turing data to optimize the work- force and innovate their processes. We will also continue to move the LES further forward in the process, in the point-of-sale (POS) as an example. To say we have big plans is an understatement. How did Candor pivot during the pandemic to keep pace with the ever-changing industry? T he pandemic hit while we were in pre-production. It did delay the opening of our HQ office in Atlanta, but it didn't impact our development or our launch. How has the underwriting landscape changed over the past 18 months from the start of the pandemic until now? T hey're opening their minds to technology beyond basic task automation, and understanding that more sophisticated solutions, like Candor, that automate both tasks and intellect are key to reducing reliance on humans, and ensuring a high-quality loan. What lies ahead for Candor? W hile we've completed well over one million hands- off, autonomous underwrites, we've just begun. We have a very sophisticated, differentiated roadmap that will offer never- before-possible solutions. Our LES benefits players across the value chain, including lenders, servicers, agencies, and the capital markets.

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