Automated Data Validation System for Loan Origination Fraud Prevention

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Solution Overview

Problem

In the secondary mortgage market, securely sharing and validating data among multiple parties is challenging due to issues with authenticity, integrity, and validity of electronic documents, which can lead to misrepresentations and fraud in loan origination processes.

Innovation Solution

An automated Data Validation System (DVS) uses an encryption key to securely transfer data between parties, allowing a third party to access and validate data from original trusted repositories, ensuring tamper-proof, non-repudiation, field validation, logging, access control, and self-sufficiency, thereby enhancing data integrity and reliability.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Productivity

If electronic documents are used to streamline loan origination processes, then processing speed and cost efficiency are improved, but data authenticity, integrity, and validity become harder to guarantee

Engineering Contradiction:

Improveprocessing speedVSAvoiddata authenticity

Core Design Contradiction:

ProductivityVSReliability

Solution Approach 1:

The system performs preliminary validation of electronic documents at the point of creation or receipt by verifying digital signatures, encryption keys, and metadata integrity before the documents enter the loan origination workflow. This preliminary action ensures authenticity and integrity are established upfront, preventing fraud while maintaining electronic processing efficiency.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The patent introduces an intermediary validation layer that acts as a trusted third party between document creators and loan processors. This intermediary verifies the authenticity of electronic documents through cryptographic validation and provides certification, enabling fast electronic processing while maintaining reliability through independent verification.

Inventive Principle:

Principle #24Intermediary (Mediator)

2Adaptability or versatility

If data is shared among multiple parties in the secondary mortgage market, then information flow and transaction facilitation are improved, but the risk of misrepresentation and fraud increases

Engineering Contradiction:

Improveinformation sharingVSAvoidfraud risk

Core Design Contradiction:

Adaptability or versatilityVSObject-affected harmful factors

Solution Approach 1:

The system creates and validates cryptographic copies (hashes) of the original loan data that can be securely shared among multiple parties in the secondary mortgage market. These digital copies maintain the integrity of the original data through cryptographic verification, enabling widespread information sharing without increasing fraud risk, as any alteration would be detectable.

Inventive Principle:

Principle #26Copying

Solution Approach 2:

The patent applies preliminary anti-action by pre-encrypting and digitally signing data at the source before it enters the multi-party sharing environment. This preemptive security measure counteracts potential fraud attempts by making the data tamper-evident and authentication-protected, thereby reducing fraud risk while enabling adaptable information sharing across the secondary mortgage market.

Inventive Principle:

Principle #9Preliminary anti-action

3Productivity

If automated validation systems are implemented, then processing efficiency is improved, but the complexity of the validation infrastructure increases

Engineering Contradiction:

Improvevalidation efficiencyVSAvoidinfrastructure complexity

Core Design Contradiction:

ProductivityVSDevice complexity

Solution Approach 1:

The patent implements a universal validation infrastructure that handles multiple types of electronic documents (loan applications, amendments, servicer reports) and multiple validation requirements (authenticity, integrity, compliance) through a single integrated system. This multi-functional approach improves validation efficiency across diverse document types while avoiding the complexity of separate validation systems for each document type.

Inventive Principle:

Principle #6Universality (Multi-functionality)

Data Source

PatentUS11227333B2Using automated data validation in loan origination to evaluate credit worthiness and data reliability

Publication Date: 2022.01.18 FANNIE MAE

AI summary

A system, comprises a device including a memory with an application configured to validate data in an acquisition installed thereon, wherein the system is improved by the application being configured to electronically receive a query for a financial transaction between a first party and a second party, electronically transmit an encryption key from the second party to a third party, electronically transmit the encryption key from the second party to a data source and accessing a first set of a data associated with the financial transaction, electronically receive the first set of data associated with the financial transaction and validate the first set of data associated with the financial transaction by applying validation heuristics and output a finding report and provide the second party validation heuristic output in the finding report.