[Kittle] Let me go off on a tangent here. Allen, I’m gonna ask you a question unrelated to your normal segment. Sure. Alan Pollock, our COO, consultant, our tech expert. Heard from a couple of people that friends of mine that, that listened to the podcast and they brought up I think we’ve touched on it before, but the actually things that are happening in the actual funding of the loans around artificial intelligence. And there has been some fraud documented where impersonation of the funding agent, the closing attorney with the borrower getting funds to be wired in appropriate places and the money’s gone. The deposit money, the money for the purchase of the loan. I don’t know if you’ve heard anything about that. And what would you, and I know this is a curve ball to you, you weren’t prepared for it, but what would you tell our listeners, our owners of our lenders out there, and borrowers who are listening right now to ensure that safety around their transaction?
[Allen] I’m gonna tell you this. One is you just did what David Lykken always does, which is preempt what you don’t know him about to talk about for the day and hit the nail on the head. That’s exactly what I was talking about today, including quotes from Sam Altman from Open AI and what he told Congress about bank fraud and impersonation, this identical topic. So why don’t we do this just so I can get the mortgage joke with AI of the day out, because you’ve not had that opportunity to sit in the big chair like you are today and hear the joke. Why don’t, if we’re done with the prior conversation, let’s just transition over if you have any final comments in the last one, and then I’ll just kick off the full tech segment.
[Kittle] No, you go with it. Let’s just go with it right now.
[Allen] Alright. The anticipation of hearing David’s question is coming within a few moments, folks, but the AI joke, I went through leaps and bounds with AI to, to make sure David Kittle had the opportunity to hear a bad joke. And I always say, David, it’s so easy because I can just say, Hey David, what do you think about this? But here it is, we fed AI so much information, right? and we all use AI now and such. So, the joke is the AI denied the loan. The reason, quote, gut feeling looks like we’ve officially taught AI way too much. All right, let’s talk about some AI stuff. I’ll leave some of the random AI things off for another day, but I will mention this quick one and then we’ll get right into the fraud component. Zillow they just mentioned, or the internet mentioned, I can’t recall who, if you’re interested, just let me know and I can provide you the source. But Zillow agent reviews they’re saying are now 24% all AI generated. They’re saying nearly a quarter of agent reviews on Zillow are now likely AI generated up 558% since 2019. That’s a staggering number. Experts say it undermines the consumer trust as searchers, can’t tell if the reviews are even real or bot approved. And if you all remember like you can be searching for, let’s say shampoo on Amazon and you read one of the reviews and it said, this was the most comfortable couch I’ve ever sat in and those issues have been around reviews on the online stores so many times. So now we’re dealing with the world of AIs and bots. Here we go. To answer your question more directly, David, Open AI CEO Sam Altman just told the Fed the fraud wave is coming. This was last week folks, and it’s AI powered deep fake voices, synthetic documents in your old fraud tools. He’s saying quote, are toast. It’s ironic though, because the only way to fight AI fraud is with better AI. So, here’s what he’s saying. Deep fake voices. This is in banking, by the way the relation of what Sam had mentioned. Fraudsters are using AI to clone voices, including family members, loan officers, and even CEOs to scam people and businesses. Fake docs. AI can generate convincing fake w twos, pay stubs, verification documents, and bank statements instantly, and the old tools don’t work. In other words, what Sam said, and for those of you just joining us at Sam Altman, CEO of OpenAI, he said, traditional fraud defenses like voice verification and template matching are now useless. AI can mimic those patterns better than real people, and here’s what he urged. Upgrade fraud detection now. So you’re gonna have to go invest in better fraud detection folks. You didn’t think you needed it. And if you’re not using anything, you need to make some phone calls require a multis signal verification, meaning biometrics, device signals, behavior patterns. That means a lot. We can get into that on a different day and share threat intelligence across your common group. So when you’re at your TMC conference David Kittle, there should be a conversation, and you may already have it, I haven’t been to one of your conferences in a while where everyone is sharing information and talking about it. That is the greater good of being part of a collaborative. And so within these other communities that you’re part of, you should be sharing and talking about how to prevent fraud. Real simply to your question, David, before I get to some other things, I had. Extremely simply, you need to make sure that you are not relying on technology to do everything You need to be communicating as a loan officer on the phone and say, the title agency just sent you an email. I wanna let you know that’s a real email. It’s not AI or something funny. Go ahead and move forward. Make sure you only log into their portal and do it. Don’t take a phone call from anyone. Don’t respond to a text message, et cetera. You probably as operator, as you said David you should have someone, your CIO who should be putting together a list of things and training your staff. As Alice would say, I’m filling in the gap for her not being here today. You should have educational training classes on AI and how to stop fraud and how to communicate with your customers about fraud. You need to get in front of it. It is happening. It’s going to happen to your organization. You’re not gonna be able to completely step away from it. And so there needs to be an action plan on what you do when it does happen as well. A lot to un uncover there, but hopefully David, I’ll pause there. I think that answers a lot of what your question was.
[Kittle] It sure does. I had no idea that that was gonna be part of your topic today. And I got a phone call, actually, I got two phone calls on it where it actually happened and the money’s gone. Yeah. It is tragic. Think about everything that was in it. Not only did it hit the borrower on the loan, but the seller, the realtor, everybody involved in that transaction, families involved, and, thousand dollars just absolutely gone because it was stolen through, through what you’ve just described. Pretty scary. Bill, Marc, you got any comments on?
[Marc] Yeah, I wanna share something that happened that I think is really unique. It happened Friday afternoon at 5:30. I got a call from a bank identifying itself as a bank in Montgomery county, Alabama Texas rather. And the guy on the phone told me he said, I’m with the bank, I’m with the fraud department. And he says is this Marc Helm? So use the right name. And he says, is your last four? So your security oh seven, blah, blah. I said, yeah. And he says we’ve got an application from the state of Florida for you for a $30,000 loan. And I started to say, why do you have an application from Florida to a Texas bank? And he said, the person’s claiming to be you. And he said, I need to transfer you. I’m gonna give you a five digit code and I’m gonna transfer you to the fraud unit of Experian. So he gives me the five digit code, makes sure twice I’ve written it down, and he transfers me to extension what is reported to be Experian. And I get this recording of Experian’s phone system. Please plea hold somewhat to fraud department. Somebody will be with you a minute. So I just, enough was enough. I hung up. Okay, it was 5:30, so there’s no way I could verify who was working at the bank. So I waited to Monday and called the bank, and I called the exact number. Now after I hung up, he called me over 20 times. So I called the bank on Monday morning, and I called the exact number. He is the lady says sir, this is a branch. We don’t have a fraud department here. And the only people that have this number of people called in the branch. So the guy masked the, whatever you call it, Allen I thought that number was called me and it wasn’t. That’s the number period on my caller deed. And she said, we don’t do any out-of-state lending. So we wouldn’t even accept an application from Florida. We would just tell ’em we wouldn’t do it. So we wouldn’t be concerned about fraud and blah, blah, blah, blah, blah. I’m telling you, the people out there trying to fraud us are getting very inventive of what they’re doing. Because it was really funny when I called that number and it was the same number on my caller ID where he called me 23 times, 22 after he called me the first time. So this one let people out there know about that scam going on now. But I liste ned to all of it ’cause I wanted to hear what he said, but I certainly, once he sent me and even had the phony Experian recording for their phone system, pretty steady of the art.
[Allen] we’re moving into tricky times. Sorry to cut you off David. We’re moving into tricky times, mark. And the average consumer does not know, when you get an email and it says it’s coming from USPS, unless you click to the email address. Where it shows that, USPS at a whole bunch of other letters that you can barely read.com. L ot of people don’t know that and they respond. Sure. Or they call that phone number and they go through the process and the deep fake and the ai and unless you’re calling, a company in Vietnam or India, you can get that sounds a little weird, but these companies are getting better and better at it. We’re in unique times and we have to extend an olive branch to our customers to help them. We can’t assume that they’re all gonna understand this.
[Marc] I’m smart enough to check that email address, but how many people aren’t? You got a good point there. But another issue on that is if they’re, if they can mask phone numbers, who it looks like the caller ID for me is how long before they can mask an email address. I don’t know. It seems like they shouldn’t be able to do that, but I’m sure they will.
[Bill] Yeah. And then so then Mark, you get to, and that’s the constant escalation of, but when you do talk to somebody, be really thoughtful about what information are they asking for and how is it relevant to what the perceived problem is. So if you’re talking about like a, the USPS and they start asking for personal information, Even if you think it’s real you have to stop. And, why are they asking for each individual? Like, how is it relevant to what they say the problem is? Yeah. And gentlemen I’ll add this one other thing here. As an operator, owner operator, or in management on the executive team of a being with a lending institution, you really need to verify with your vendors another item that your CIO should be doing. That you’ve got multifactor protection turned on, that you don’t have data breaches because the risk for you being named in a lawsuit is extremely high depending on information that could be stolen. And technology vendors are being threatened every day, whether they know it or not. For example, there are hackers out there that do nothing but scan unlimited numbers of IP addresses if you don’t know what an IP address is, folks, it’s basically different ways, addresses that, that server equipment that puts websites and APIs and systems out there. It’s the physical addresses that a.com name would be connected to. And they have software that scans these nonstop and it looks for open holes. And an open hole can be something as simple as an FTP port, if you remember that term from 20 years ago. They still exist. It could be very a simple as an open SQL database connection.And once they receive those, they find them. Your tech vendor may not know that they exist. It’s very possible that they can then get access to all of your loan data and your borrowers. And you are at risk, not the tech vendor. You’re both at risk, but you’re at risk ’cause it’s your customer. One thing that every vendor that you have should be under is a SOC two audit because in a SOC 2 audit, they have to go through an ongoing nonstop penetration test. So I don’t wanna get into too many details, all important. We have to inform our employees and our consumers. But David, it is a very difficult we’re very challenging time for AI and for, fraud.
[Marc] You just brought up an interesting thing, Alan, so I gotta ask this question and if anybody questions whether this is applicable for our call, I think it is. I just want to ask a question on an IP address. Okay. The IP address is gonna be relative to where a person is, right? Depends on the traffic. Okay. So if I’m sitting in Florida and I’m talking to my office in Alabama and if my IP address would most likely be a Florida IP address, right? How much can you go down and identify that IP address? On the detective shows, on tv, they seem like they can identify, or federal detective shows, they seem like they identify it right down to city into an address.
[Allen] Im not only a doctor but I play one on tv. So the reality Marc, is that there are VPNs out there that you can pay for $29 a month and you can mask and redirect your identity. So you can be in the Philippines and you can send an email to somebody through A VPN or an IP address that is a US based, and it looks like it. If there was something legally that occurred and the police were to get involved, they can go to the vendor. If it’s a US based vendor they can go to the vendor and through a court, be able to get the records and then find where it was directed. But it’s not likely that they’re gonna get it. So yeah, we’re in a time where that can be masked as well.
[Marc] Okay. Good information.
[Kittle] Yeah, so what cannot be masked eventually by AI and there’s gonna have to be something now developed. Everything new that comes out opens up several opportunities for everything to prevent the fraud in the new entity. Yeah, they’re gonna be, we’re gonna be able to fake you. You can see on social media right now, you can still tell the difference, but videos are out there of, lemme just, grab some famous person selling something and you can barely, it’s really good, but you can barely tell the fact that it’s fake. And it’s just gonna continue to get better a nd better, I would assume. Correct, Allen.
[Allen] That is correct.
[Marc] I was thinking about employees using IP addresses to see if their employees are really working at their home or they’re sitting on the beach.
[Allen] For the average employee Marc. Especially when you have equipment that has been provided by the company and it’s locked down with Microsoft tools that a lot of ins a lot of companies, mortgage lenders are doing now, that, that is pretty easy to detect.
So there’s a difference there compared to someone trying to steal information from you. So you’re right on that point. Yeah. But but to your point, David, it Yeah it’s getting better and better by the day. I bet you if with the right tech and it’s out there, we probably could automate this whole podcast by recording our voices and sending a script in and not have to actually be here.
[Kittle] I could get an extra nine in every day we did that, so That’s right. Not to make light of it, but that is pretty scary. Wow. Give me a landline and hand carry my voes and vods and originate loans like we used to in the old days. There was no, just no fraud back then to speak.
[Allen] The worst thing we had was the fax machine running outta toner. That’s it.
[Bill] Yeah. And I remember explaining to folks how in the underwriting space, way back when TurboTax came out, that as an underwriter you needed to come up with a whole new set of tricks to identify fraudulent tax returns. Because, one of my favorites way back when was you add up the cents column. Because everybody’s really good with whiteout on the dollar side, but they forget and then TurboTax comes out and explaining folks like, you understand, somebody can create a set of tax returns that look legitimate because the math is automated. That’s now child’s play. It’s just, yeah. Gone so much further. But then, so do everything Allen talks about. Sometimes it comes back to your own intelligence. And there was an article in the Wall Street Journal over the weekend about some massive financial swindling. And the gist of the story was somebody had what they thought lent a billion dollars in securities as collateral to get a $400 million loan. And what they didn’t realize is the loan documents. They were actually giving the collateral to the fraudster and the comment in this article probably former number two for the this rich south American was I just thought they were standard loan documents. I didn’t have her attorney read them. you can’t control.
[Marc] No. Lemme tell you, something happened to me two years ago I was meeting with a number of contractors, but it was this before I started assignment Alabama that were working with me on a major project. It was a half million dollar project, big project. One of the biggest ones I ever had in my consulting company. And one of the guys I did not know, but we had a lunch meeting Okay. And, I had left my wallet in the hotel. Okay. This was not a push it off on somebody else. I had left it. The contractor was there and he says they handed me the check. I paid attention to what the check was. And it was one of those checks had already had the tip included cause it was a big enough group, it had the 18% included. And I’ll just say his name was Joe. And I handed it to Joe and I said, Joe, since you’re billing me anyway, would you mind paying this? I don’t have my credit card with me. I don’t wanna have to run and go to the hotel and come back here and wait that long for people to get their card and you pay it and you just bill it to me and I’ll reimburse you. Okay? And I did that, and he paid the check. I’m one of these guys that pays attention to every expense on every bill that a contract gives me. And there was nine people at this luncheon. And when I got to luncheon, I got a pretty damn good memory, even in my old guy. And I got the bill. And the bill ended up being for about $300 more than what the bill was on the check. So I asked my chief operating officer, who’s a computer whiz, and she says, Marc, she says, I can take any expense document, any airline ticket, anything you have, I can put that in A PDF and break that PDF and I can change everything with the exact font used so you’ll never see it. And I can give you an Air Airline ticket for three or 400 more dollars than it really was or I can give you a dinner tab for a hundred dollars more than it was. And I said, damn, after a while, these things can add up. So I wonder, I just wonder how much of that type fraud exists today with corporations so they don’t even really know it on the people that don’t use a company credit card, there’s a real reason to use a company credit card, if you think about it. Now, if people are starting to do that on their personal credit cards.
[Kittle] Yeah, great point. Allen, you have anything else for us? Not that wasn’t enough. My gosh.
[Allen] No. I’m gonna leave us on a positive note. It’s a great time to buy our house and we can do great things for the next generation of homeowners, the folks that are downsizing and the folks that are upsizing. So let’s get out there and make it happen.
[Kittle] Absolutely. Yeah. Great ending.
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.