Patent Issued for Using automated data validation in loan origination to evaluate credit worthiness and data reliability (USPTO 11227333): Fannie Mae
2022 FEB 03 (NewsRx) -- By a
The patent’s assignee for patent number 11227333 is
News editors obtained the following quote from the background information supplied by the inventors:
“1. Field of the Invention
“This application relates to automated data validation for loan origination data more particularly to evaluate credit worthiness and data reliability.
“2. Description of Related Art
“Misrepresentations of income, assets, identity or other key factors on a loan application are difficult to predict because, by definition, borrowers may purposefully attempt to hide fraud in order to secure the loan and evade criminal punishment. Because these misrepresentations present a significant risk in lending and repurchasing, it may be prudent to search for and identify loan applications with characteristics indicative of misrepresentation so that more educated decisions regarding repurchase decisions and transaction validations can be made.
“A lender may be concerned with whether the lender’s data are sufficient to determine the credit worthiness of the borrower, whether any supplemental findings support or dispute the lender’s assertions about the credit worthiness of the borrower, whether there are any misrepresentations or inconsistencies in the accounts that would affect the lender’s view of the borrower’s credit worthiness and whether additional data obtained by third party verification supports or contradicts borrower assertions about income and assets.
“Therefore, the present invention relates generally to validating documents and more particularly to automated electronic validation to validate data in loan origination data to evaluate credit worthiness and data reliability.
“Information and data are being increasingly processed electronically in lieu of traditional paper processes. Electronic documents offer substantial benefits, such as cost reduction and the accommodation of rapid manipulation and organization of information. However, issues arise around electronic documentation such as: authenticity (that a document is what it purports to be and has been actually signed by the appropriate entities), integrity (that a document is complete and unaltered), and validity (that a document complies with business and legal rules). Validations of electronic documents satisfy these concerns and help to support the adoption of electronic documents in various environments.
“The collection, generation, movement, and authentication of paper documents among numerous unrelated parties is been critical to the mortgage process and repurchase process.
“Computers and telecommunications have been used to improve the mortgage process for both consumers and service providers and various systems have been developed for streamlining the application, evaluation, underwriting, and origination processes.
“Similarly, once a mortgage has been originated, electronic data networks have improved information sharing among parties in the secondary mortgage market. These data networks facilitate transactions and decrease processing times for mortgage servicers, mortgage owners, and creators of mortgage-backed securities.
“Once a mortgage has been originated, electronic data networking has improved information sharing among parties in the secondary mortgage markets.
“These data networks facilitate transactions and decrease processing times for mortgage servicers, mortgage owners, and creators of mortgage-backed securities.
“Historically, successors to a contract would provide a credit umbrella to a mortgage between a borrower and a lender on the condition that the lender first collects and validates a first set of data such as: asserted incomes, assets and liabilities of the borrower.
“The lender would validate this provided data by contacting various banks, tax providers, the
“However, a problem with electronic document validation is securely sharing data among parties in the secondary mortgage markets.
“The secondary mortgage market includes several different parties, namely: a first party (e.g. an applicant, borrower, insured, etc.), a second party (e.g. underwriter, lender, broker, agent, correspondent, initial contractor, etc.) and a third party (e.g. insurance, reinsurance, securitization, rating agency, successor, etc.).
“In the automated process of supporting due diligence of a third party, which seeks to acquire a contract for a loan associated with a financial transaction from a second party, the data relied upon by the second party must be validated via electronic transmission from a trusted repository (e.g. government entity, bank, employer, credit agency, etc.).”
As a supplement to the background information on this patent, NewsRx correspondents also obtained the inventors’ summary information for this patent: “Thus, what is needed is an automated, computerized and electronic Data Validation System (hereafter “DVS”), which verifies the correspondence of processed data to that contained on documents actually used in transactions and that provides greater assurances of data integrity than is provided with conventional electronic document validation by providing a mechanism whereby, in the secondary mortgage market, the third party of the mortgage receives from the second party, an encryption key allowing the third party to acquire first set of data and perform validation on said first set of data.
“The encryption key would allow the third party to access and validate data associated with the contract for loan by providing access to original trusted repositories to perform validation.
“By passing the encryption key from the second party to the third party, the system allows the third party to validate the data associated with the contract for a loan.
“The present disclosure provides improved electronic document validation using an encryption key to validate data provided by a first party to a second party and verified by a third party.
“Validation of the data are variously helpful in originating, closing and delivering loans to an investor in what is referred to as the secondary mortgage market.”
The claims supplied by the inventors are:
“1. A method for automated data validation in an application for a mortgage loan, the method comprising: electronically receiving a query for a financial transaction between a first party and a second party, wherein the financial transaction is a loan application, the first party is a borrower, and the second party is a lender; electronically receiving an encryption key from the second party; electronically transmitting the encryption key to a data source and accessing a first set of a data associated with the financial transaction through use of the encryption key; electronically analyzing the first set of data to derive asset information of the borrower from secondary information in the first set of data, the asset information including income, the secondary information including at least one of base income, overtime or bonus information; validating the first set of data associated with the financial transaction by applying validation heuristics, wherein validating the first set of data includes validating the loan application by applying the validation heuristics to the derived asset information, and wherein validating the first set of data is used to generate a finding report; and outputting the finding report to the second party.
“2. The method of claim 1, further comprising: comparing the first set of data for the financial transaction with a second set of data for the financial transaction, wherein the first set of data are data received from the data source and the second set of data are data received from the first party.
“3. The method of claim 1, further comprising: electronically communicating, to the second party, the validation heuristics used for generating the finding report.
“4. The method of claim 1, further comprising: electronically analyzing, by the processing unit, the first set of data to derive cash flow, income, assets and credit worthiness of the first party.
“5. The method of claim 1, wherein the first set of data associated with the financial transaction is an audit copy from the data source.
“6. The method of claim 1, wherein the derived asset information further includes one or more of cash flow, assets and credit worthiness of the borrower.
“7. A non-transitory computer readable medium that stores program code that is configured to, when executed by a computing system, cause the computing system to perform operations comprising: electronically receiving a query for a financial transaction between a first party and a second party, wherein the financial transaction is a loan application, the first party is a borrower, and the second party is a lender; electronically receiving an encryption key from the second party; electronically transmitting the encryption key to a data source and accessing a first set of a data associated with the financial transaction through use of the encryption key; electronically analyzing the first set of data to derive asset information of the borrower from secondary information in the first set of data, the asset information including income, the secondary information including at least one of base income, overtime or bonus information; validating the first set of data associated with the financial transaction by applying validation heuristics, wherein validating the first set of data includes validating the loan application by applying the validation heuristics to the derived asset information, and wherein validating the first set of data is used to generate a finding report; and outputting the finding report to the second party.
“8. The non-transitory computer readable medium of claim 7, wherein the operations further comprise: electronically comparing the first set of data for the financial transaction with a second set of data for the financial transaction, wherein the first set of data are data received from the data source and the second set of data are data received from the first party.
“9. The non-transitory computer readable medium of claim 7, wherein the operations further comprise: electronically communicating, to the second party, the validation heuristics used for generating the finding report.
“10. The non-transitory computer readable medium of claim 7, wherein the operations further comprise: electronically analyzing the first set of data to derive cash flow, income, assets and credit worthiness of the first party.
“11. The non-transitory computer readable medium of claim 7, wherein the derived asset information further includes one or more of cash flow, assets and credit worthiness of the borrower.
“12. A system, comprising: a device including a memory with an application configured to validate data in an application installed thereon, wherein the application is configured to: electronically receiving a query for a financial transaction between a first party and a second party, wherein the financial transaction is a loan application, the first party is a borrower, and the second party is a lender; electronically receiving an encryption key from the second party; electronically transmitting the encryption key to a data source and accessing a first set of a data associated with the financial transaction through use of the encryption key; electronically analyzing the first set of data to derive asset information of the borrower from secondary information in the first set of data, the asset information including income, the secondary information including at least one of base income, overtime or bonus information; validating the first set of data associated with the financial transaction by applying validation heuristics, wherein validating the first set of data includes validating the loan application by applying the validation heuristics to the derived asset information, and wherein validating the first set of data is used to generate a finding report; and outputting the finding report to the second party.
“13. The system of claim 12, wherein the application is configured to: electronically compare the first set of data for the financial transaction with a second set of data for the financial transaction, wherein the first set of data are data received from the data source and the second set of data are data received from the first party.
“14. The system of claim 12, wherein the application is configured to: electronically communicate, to the second party, the validation heuristics used for generating the finding report.
“15. The system of claim 12, wherein the application is configured to: electronically analyze the first set of data to derive cash flow, income, assets and credit worthiness of the first party.
“16. The system of claim 12, wherein the derived asset information further includes one or more of cash flow, assets and credit worthiness of the borrower.”
For additional information on this patent, see: Medinets, Alex. Using automated data validation in loan origination to evaluate credit worthiness and data reliability.
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