Ralo, which claims to be the first artificial intelligence mortgage broker, has started business, having completed a $2.9 million seed round.<\/p>\n
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Its investors include Y Combinator, Manresa Ventures and Pack Ventures, along with angels such as Charles Ferguson (director of Inside Job, a documentary about the Great Financial Crisis) and Ryan Frazier (co-founder and CEO of Arrived<\/a>).<\/p>\n The company says it uses artificial intelligence to automate the entire process, saving consumers money by cutting out loan officers, processors and underwriters, which it claims take hefty commissions.<\/p>\n Its founders, former Google Product Manager Arjun Lalwani and former Google Software Engineer Helly Shah, have become licensed loan officers and are currently Ralo’s only employees. Shah also formerly was a quantitative analyst at Goldman Sachs.<\/p>\n Can AI originate a mortgage loan?<\/p>\n A recent Mortgage Bankers Association white paper said the Secure and Fair Enforcement of Mortgage Licensing Act does not set requirements for AI. But other laws, including Truth-in-Lending, require a person with a Nationwide Multistate Licensing System number<\/a> to sign an application.<\/p>\n Meanwhile, slightly more than half of the prospective homebuyers participating in a Veterans United Home Loans survey<\/a> said they would be comfortable making their purchase without any human involvement.<\/p>\n Just under 90% would share personal financial information with a lender’s AI tool in exchange for real estate finance advice, while 68% said they trust the mortgage information technology provided.<\/p>\n What led to Ralo’s creation<\/p>\n Lalwani said he applied for a mortgage a few years ago in San Francisco, and “the experience was very outdated.”<\/p>\n The process was trying, including a denial and having to restart with another bank.<\/p>\n Similarly, Shah looked to get a mortgage in New York. “She faced the same problems where she did not get favorable terms, and was unaware of how to negotiate and shop,” Lalwani said. “We both were at Google and we were talking about just all the cool AI tech we’re building and how getting a product on Amazon is so easy, but for the largest purchase of our life, it somehow feels very outdated, and feels like we’re being transported back to the early 2000s.” Much of the process still involves sending .pdf files back and forth to the lender, he said.<\/p>\n They decided to focus on fixing the inefficiencies in the process.<\/p>\n