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This piece originally appeared in the November 2023 edition of MortgagePoint magazine, online now.
Gagan Sharma is the Founder and CEO of BSI Financial Inc., a cloud-based, open API and AI-driven platform. BSI offers an end-to-end digital servicing platform that enables investors and originators to transact seamlessly, with automated loan boarding, investor reporting, and data-driven loan monitoring through the lifecycle of the mortgage. BSI Financial has also built a proprietary AI-driven compliance automation and workflow that ensures complex, state-by-state regulations are kept up-to-date and acted on with precision and certainty, providing real-time visibility into the mortgage details and exceptions.
A seasoned entrepreneur and executive with more than 20 years of experience in financial services and technology, Sharma enjoys solving challenging customer problems in the financial sector and has a proven track record of bringing startup concepts to life and scaling for success, including successfully exiting and selling a global financial services and technology outsourcing company.
Since leading an investment group to acquire BSI from a bank in 2006, Sharma has transformed the company from a small loan servicer, into a fast-growing mortgage fintech, fostering 70X growth since its acquisition. BSI was named on Inc. Magazine’s Inc. 5000 list of fastest-growing companies for two years, and on The Dallas 100 list of fastest-growing companies in North Texas for four consecutive years.
Sharma was named a finalist for the EY Entrepreneur of the Year in the Southwest Region in 2017, is a member of the Young Presidents’ Organization (YPO), and has an MBA from The Wharton School at The University of Pennsylvania and a B Tech from the Indian Institute of Technology, Delhi.
MortgagePoint had a chance to sit down with Sharma to discuss the role of technology, artificial intelligence (AI), and machine learning (ML) in enhancing the borrower experience, and the pivotal role it all plays in compliance today.
Q: Can you describe the current state of the mortgage industry’s tech space?
As we think of the role of technology, you have the borrower’s experience and all of what the borrower sees when entering our digital portal. Then there is the aspect of how we use technology to work in the background in ways that the borrower doesn’t see, but it makes the process go smoother, better, faster, whether that’s in just workflow automation or compliance.
If the borrower is on our website, we are trying to give them the functionality that they would want. If their homeowner’s policy is about to expire, we can help them. At the end of the day, our goal is to make the payment that the borrower is making, keep that process sustainable, and keep that going so that the borrower doesn’t go delinquent.
We use technology to give the borrower a little nudge and provide a little reminder to the borrower. People are busy with their day-to-day life, as a servicer, if we can make that easier, that’s much better for all involved.
In the background, things that the borrower may not see are things around our industries. There’s a lot of information and data going back and forth between us, our providers, our third parties, and when loans transfer from one servicer to another. We are starting to apply technology and ChatGPT functions to help us move data, streamline data, optimize data, check data quality, and automate the data migration in a way that the borrower may not directly see. The benefit in the end is that we can move faster and remain more compliant and accurate, thus improving the borrower experience. We can respond faster when loans come into our system and have more information available sooner.
There is also an aspect of this around compliance. We have built a rules engine that we think is unique in the industry. We offer that in the marketplace as an independent software provider, as well as a rules library that we have created. We are starting to use that to kick off remediation action as well. This is doing the next best action in the background where, again, it will allow the process to move faster, the borrower experience will be better, the borrower can get what they want faster, and we can be more responsive to the consumer.
Q: BSI Financial has always been technology-focused. What has changed, if anything, in terms of customer expectations over these past few years? Are you seeing changes as far as customer expectations are concerned and what are they expecting you to bring to the table? How has that impacted your philosophy or approach?
I think of us as mortgage-focused, sitting in the broader spectrum of consumer finance. If you look at every other consumer finance product, everything is going, so things need to become more frictionless for the borrower. That results in more texting, more digital communication, and further enhanced self-service.
As a mortgage servicer, BSI Financial can access more data, so we are using that data to serve the needs of the borrower without having to pick up the phone and call us. Our call center and customer service team are always available and will always be there to serve the customer’s needs, but borrowers often have a desire to get a digital-first customer experience.
Some of the big companies like Amazon and Uber have set the bar on what the consumer experience looks like. When the consumer says, “Hey, this is how I can board a plane, or this is how I can order food, or go shopping,” they may come to our site and ask, “Why is this not the same thing?” What the pandemic did was, because everybody was at home, digitization was accelerated in the entire economy.
Five years ago, not many people made video calls. But now, doing a Zoom or a Teams call is how we conduct business today.
Digitization has accelerated so much that what was supposed to happen in five or seven years took place in just two years, and that has also led to a change in the consumer experience as well. When consumers are applying for a forbearance, they want a digital-first experience. That digital-first experience does not mean that compliance can be compromised.
Q: What are the challenges of maintaining that balance where you are trying to serve what the customers have come to expect, as well as advancing technology, but you still need to serve this baseline of compliance? What is that process like?
That’s a great question. What I would say is that we think of it as it must start from thinking of the customer experience first and designing that process first, and then layering technology on top of it. We think of ourselves as a technology-forward, technology-first company, but we think of it as letting us design the right process, and then layer technology on top of it.
The second part of it is, just like when processes were performed by humans, there had to be extensive quality control, checking, and testing. That same thought process of rigor and testing has to be done when the process moves into a more automated mode. As you already pointed out, from a compliance perspective, the standards are still the standards. Just because things are automated does not mean the compliance standards have changed, and so doing rigorous testing of the rollout of new processes and new methodologies is super critical as we roll out new functionality.
Q: AI has been a topic that people have been talking about forever, what have you seen so far, and what are you working with? Is AI still in its early days? Are people getting overexcited about something that is not quite there yet?
The way I would frame it is AI is a technological capability. We think of it as, what are the use cases where this technology can be truly implemented?
One thing that we use is called “computer vision,” and “computer vision” is the new name for OCR technology. Computer vision is basically AI’s ability to read a document. Not to go too far into the weeds, but OCR is Optical Character Recognition. That technology used to work a certain way.
Computer vision is a new capability that allows bigger mortgage loan files and more documents. How do you go through a 500- to 700-page loan file to find what you are looking for? Computer vision allows any entity—an originator or servicer—to index documents and extract information from documents. The interesting part is the accuracy of that is now much higher. Five to seven years ago, this technology was still in its infancy. In our industry, due to compliance requirements, we need things to be at a certain level of accuracy before we can accept them. I would say that computer vision technology is at that level of accuracy.
These are the same capabilities that have been created by the big tech companies. Amazon has one model, Google has its model, Microsoft has a model, and then people have built models on top of their basic core technology.
I see people experimenting with virtual chat boxes, and again, because of compliance standards in our industry, I think that needs a little bit more work. The last thing that we are working on is the next best action capability, whether that’s consumer-facing or our internal employee-facing system. Working on the next best action capability and building that capability within our toolsets is the other area, where I think we are in the third inning of that game … it’s coming along, but there’s a lot more that can be done.
Q: One of the things that you hear anecdotally in a lot of the coverage of AI, in general, is concern about it being used to try to gauge credit scores, as there is inherent bias sneaking in based upon what data has not been fed and what assumption the AI is making. Where is that part of the conversation unfolding right now?
You are right that in AI and the way some of these AI models work … how does one test AI models for unconscious bias or bias that the model may not be looking to produce, but it may produce bias in the end? I would suggest that other aspects of consumer finance, things such as credit cards and other consumer finance products, are a little bit further ahead of us in terms of evaluating credit decisioning.
Much of the credit decisioning in our industry is done by some of the large investors, the GSEs, etc. They are the ones who are making these broader credit-decisioning guidelines, and then we as an industry follow through on those guidelines.
Q: What are some of the frontier technologies that you are looking forward to that are maybe not ready for prime time? Where do you see the industry heading on a technological front?
I feel our industry has not developed a good use for mobile technology as of yet. Mobile technology is not a new technology, and it is not a frontier technology, but we have not found that killer app that has the borrower saying, “Yes, I like it.”
I also feel like blockchain is a technology that just has not broken through as of yet. I think if there were a public block[1]chain that was, if I may even call it almost open source, everybody could write on, that would be interesting.
If you think of what merged it to us as an industry, blockchain could fit in that ilk of things where it is owned by the entire industry or is almost a public good that everybody uses. I know a couple of people have tried to implement that and execute on that, but I do not think they have managed to thread the whole needle all the way through. At some point, somebody’s going to figure it out, but we haven’t figured that out as an industry just yet.
