How mortgage underwriting’s thorniest issues could be solved with AI

By Spencer Lee

While lending volumes may have fallen from the heights of a few years ago, a mortgage fintech is rolling in, looking to tap into the opportunity presented by the surge of generative artificial intelligence.

Formed in 2022, Tidalwave plans to employ AI that provides real-time answers for loan underwriting that will lead to a more equitable origination process. Tidalwave was co-founded by longtime technology executive Diane Yu, who also heads the firm as CEO.

Tidalwave rolled out its first product this year, an AI-powered underwriting engine called Solo. With integrations to Fannie Mae and Freddie Mac automated underwriting systems within the pre-approval stage announced this summer, Solo has already attracted two beta clients. The company hopes to build Solo, which Yu described as a copilot to serve both lenders and borrowers, into a tool that will eventually serve all parties through closing.

Portions of the interview, edited for length and clarity, follow.

Can you describe your tech background? How did you first get into the field?

I started my career at this point, 27 years ago, as an engineer. I have always been an engineering tech executive, starting as an entry-level engineer. I spent 10 years at Doubleclick. I only left Doubleclick after the Google acquisition. I was running their engineering team. That’s when I decided, basically I’m going to leave and build my own company, Freewheel. So I built Freewheel with two of my other partners.

You had the tech background, but what attracted you to mortgage exactly?

I am based in New York. There are two industries in New York. One is advertising, the other is financial, so I always had my heart in the financial industry. After many years in advertising — when I think that I wanted to do something brand new and the next industry that could be interesting for me — fintech would be my number one choice. That’s when the founder of Better, Vishal Garg, reached out to me. Being at Better, I got to learn everything about the mortgage industry. I realized how outdated the tools have been in the mortgage industry and also realized how painful it has been and continues to be for borrowers to get a mortgage. So I want to use my knowledge and my capability to change all of that for the entire industry, not just for a single lender. That’s my mission — basically creating a tool to change the mortgage industry. The other one is also very personal for me. I came from a minority background, and I’m a female. I remember 20 years ago when I first got my first house as a female homeowner with a minority background, the loan officer asked me multiple times whether I wanted to put my husband’s name on the mortgage application. It is personal for me to have the capability regardless of an individual’s unconscious bias. As a minority, as a female, my mortgage application journey can always be treated fairly just based on my financial information — not based on the color or my status, or or lack of status. Having the capability of using the machine to evaluate that, it’s the way to provide the most fair treatment to borrowers.

The industry has changed a lot in just two years. What drove you to create the company at that particular time? Was your plan to form the company independent of what was going on in the market?

I left Better in April 2022. After I left, I took a break. In November of 2022, all of a sudden ChatGPT came in. I have been following ChatGPT very closely. That’s when I realized, with the ChatGPT capability, there is a possibility to combine the technical platform, the automation, along with the ChatGPT-like conversation to create this tool to be able to benefit the industry. That’s when I found the raw ingredients were ready. November 2022, that’s really when we started to form that idea and see whether it’s possible. Then in March 2023, that’s when I started taking money. I took money from the investor who basically invested in my first company. That’s when we started. The reason I started to build a mortgage company when nobody was investing in mortgage technology at that time was because I see the pain the consumer has to go through. I feel with the latest technology available now, an ultimate tool can be created to solve that problem.

The mortgage industry overall has been slow to adopt digital tools. How challenging is it to start a fintech with that kind of history?

It’s not easy. Mortgage underwriting is super complex even with our capability. You know, I read through Fannie’s underwriting selling guide multiple times. Fannie’s selling guide is 1,200 pages. I read through every single structure. And Freddie is even thicker. It has about 2,500 pages. I read through both of them because I want to make sure what we build has the capability to automate, basically creating our ultimate solution to make all this pain go away. It is pretty complex, and I think it’s the complexity stopping the industry from evolving quickly. Tidalwave starts at the right time because the technology breakthroughs make it ready so that we can take advantage of all the latest technology has to offer. On top of that, using our experience to build a scalable tech platform, we can quickly evolve and build that capability.

Apart from reading thousands of pages of selling guides, how did you ensure Solo could meet regulatory and compliance rules?_

That’s why our initial product is a copilot. We test around everything, but the loan officer and underwriter can still evaluate everything we’ve evaluated. We’re not relying on Solo to make this decision on its own.

The Original Press Release