Category Archives: Mortgage & Real Estate

Lower FICOs, aloft DTIs prompt a change in FHA loan underwriting

The Federal Housing Administration is returning to primer reviews of higher-risk loans it insures given it’s anticipating that a flourishing share have reduce credit scores, aloft debt-to-income ratios, or both.

Effective for box numbers reserved Monday, a FHA is creation a change to a Technology Open to Approved Lenders Mortgage Scorecard complement that reinstates primer underwriting mandate for certain mortgages with credit scores next 620 and DTIs above 43%.

“FHA will delicately guard a impact of this change and is scheming to exercise additional changes to say a improved change of handling risk and fulfilling a mission,” a group pronounced in an email to single-family debt lenders and stakeholders.

FHA high DTI

This will symbol a third time a FHA has altered this requirement in new years. The group creatively introduced a primer underwriting requirement in 2013, though private it in Aug 2016.

Certain FHA loan credit indicators are weaker than they have been in several years.

The commission of normal single-family FHA loans with DTIs above 50% recently rose to a high that hasn’t been seen given mercantile year 2000. During a mercantile year that finished Sept. 30, 2018, roughly 25% of a normal single-family mortgages a FHA insured had DTIs above 50%. The commission of high-DTI FHA loans has continued to arise in 2019. More than 28% of a FHA loans permitted in Jan 2019 had DTIs above 50%.

Also, a normal FHA credit score, during 670, is a lowest it has been given 2008. More than 28% of a normal single-family loans a FHA permitted during a initial entertain of a stream mercantile year have credit scores next 640, and some-more than 13% of all normal single-family mortgages a FHA permitted during a same time duration had credit scores next 620.

Additionally, there is an augmenting thoroughness of loans that have both credit scores next 640 and DTIs above 50%, according to a FHA.

Fannie Mae also has tweaked a underwriting discipline due to concerns about layered risks and aloft DTIs.

DTIs above 50% are deliberate intensely high. A DTI of 43% or reduce is indispensable to accommodate a Qualified Mortgage clarification that gives loans a protected bay from ability-to-repay requirements.

Government and government-sponsored craving loans have exemptions from have carrying to accommodate QM mandate that have been subject to debate.

Given a decrease in loan prospects during a past integrate of years and a vigour on lenders to move in mortgages, there has been regard that risk layering could increase.

Multiple exceptions to customary debt underwriting contributed to a 2007 housing crash.

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Airbnb suffers major loss in fight for Santa Monica rentals

Cities continue to tighten their grip around Airbnb and other short-term rental sights, and Santa Monica, California, is no different.

In the latest loss, Airbnb and Expedia Group’s HomeAway lost their case in the Ninth Circuit Court of Appeals to the city of Santa Monica. This means the previous ruling still stands that the short-term rental companies are liable for illicit rentals on their sites.

In Santa Monica, short-term rentals must be licensed by the city. If they aren’t, the companies will now be responsible for taking them off the site.

“This critical local law prevents residences in our community from being converted into de facto hotels – it protects affordable housing and it helps residents stay in their homes,” Santa Monica City Attorney Lane Dilg said in a statement.

And while the short-term rental sites tried to argue this regulation would make it impossible for the sites to operate, the three panel judges disagreed.

“Even assuming that the ordinance would lead the platforms to voluntarily remove some advertisements for lawful rentals, there would not be a severe limitation on the public’s access to lawful advertisements, especially considering the existence of alternative channels like Craigslist,” the judges said in the ruling.

Santa Monica’s regulations are among the strictest in the nation. They prohibit rentals of whole homes to travelers for less than 30 days. Vacation-rental hosts in the city can only rent rooms to tourists and must be present throughout the stay.

As for the city, it is pleased with the ruling and called it a win for housing and affordability.

“We are thrilled to have confirmation from the Ninth Circuit that our balanced approach to home sharing is working at a time when housing and affordability continue to challenge the region,” Mayor Gleam Davis said. “This is a big win for Santa Monica residents and our residential neighborhoods.”

But Santa Monica isn’t the only city Airbnb is fighting. New York City is upping the ante in its fight against Airbnb, as the two sides battle it out in court and in the court of public opinion.

New York City Mayor Bill de Blasio recently announced that the city is issuing a subpoena to Airbnb, demanding that the short-term rental site turn over the listing data that’s at the center of a legal battle between the two sides.

Last year, New York passed legislation designed to combat the rise of short-term rentals in the city. The law prevents landlords and tenants from illegally renting out apartments for a few days at a time to tourists.

And Massachusetts recently passed a law that extended the state’s current 5.7% hotel tax to most short-term rentals, along with giving municipalities the option of tacking an additional 6% onto the tax; 9% if an owner rents out two or more units in the same community.

But despite all of these battles, the company seems to be remaining optimistic.

“Airbnb has made great strides around the world, working with dozens of cities to develop more than 500 partnerships including fair, reasonable regulations, tax collection agreements, and data sharing that balance the needs of communities, allow hosts to share their homes in order to pay the bills and provides guests the opportunity to affordably visit places like the California coast,” the company said in a statement.

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These are the best counties to buy single-family rentals

Single-family rental purchases inched forward in the first quarter of 2019, according to ATTOM Data Solutions‘ latest Single-Family Rental Market report.

The Single-Family Rental Market report analyzes single-family rental returns in 432 U.S. counties each with a population of at least 100,000.

According to the analysis, the average annual gross rental among the 432 counties was 8.8% for 2019, rising from an average of 8.7% in the prior year.

ATTOM Data Solutions Chief Product Officer Todd Teta said buying single-family homes to rent them out is a better deal for investors in 2019 than it was during the same time in 2018.

“Last year, at this time, investors were seeing returns drop in three-quarters of the counties that were analyzed,” Teta continued. “So far this year, those margins are up in six out of every 10 counties analyzed.”

However, despite the generally rosier picture, Teta notes profits vary widely and investing in the single-family home rental market is not always a great move.

In fact, according to Teta, the typical bottom-line gain from county to county this year has ranged from as little as 3% to as high as 29%.

Notably, the report indicates the housing markets that posted the highest rental returns included Baltimore City, Maryland, up 24.5%; Bibb County, Georgia, up 21.9%; Cumberland, New Jersey, up 21.2%; Winnebago, Illinois, up 17.1%; and Wayne County, Michigan, also up 17.1%.

However, the housing markets that posted the lowest rental returns included San Mateo County, California, up 3.4%; San Francisco County, California, up 3.7%; Marin County, California, up 4%; Santa Clara, California, up 4.2%; and Kings County, New York, up 4.3%.

NOTE: ATTOM Data Solutions calculated rental returns by utilizing annual gross rental yields provided by the U.S. Department of Housing and Urban Development.

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New York man admits to playing key role in massive multifamily real estate scandal

A New York man has admitted to taking part in a massive multifamily real estate scandal that harkens back to some of the darkest parts of the housing crisis, including fake residents, fake incomes, and inflated mortgages.

According to the U.S. Attorney’s Office for the Western District of New York, Patrick Ogiony pleaded guilty last week to conspiracy to commit bank fraud.

The charges stem from an investigation that the Wall Street Journal previously called “one of the biggest mortgage-fraud probes since the financial crisis.”

According to the U.S Attorney’s Office, Ogiony conspired with others to defraud financial institutions including Evans Bank, UBS Securities, MT Bank, Arbor Commercial Mortgage, SteepRock Capital, and Berkadia Commercial Mortgage by providing false information about apartment communities in several states that were owned by Morgan Management.

Ogiony is a former employee of Aurora Capital Advisors, a mortgage brokerage company owned and operated by Frank Giacobbe, who is also charged in the matter.

Court documents show that Ogiony conspired with Giacobbe, Kevin Morgan, Todd Morgan, and others, to broker mortgages on behalf of Morgan Management, a real estate management company that managed over 100 multifamily properties

Kevin Morgan was employed as a vice president at Morgan Management, while Todd Morgan was employed as a project manager.

In pleading guilty, Ogiony admitted to providing false information to financial institutions and Fannie Mae and Freddie Mac overstating the incomes of properties owned by Morgan Management or certain principals of Morgan Management.

Specifically, Ogiony admitted to using various means to mislead lenders about the properties’ occupancy, including providing false rent rolls to lenders and appraisers on a variety of dates, overstating either the number of renters in a property, the rent paid by occupants; providing or conspiring to provide false and inflated income statements for the properties; and working with others to deceive inspectors into believing that unoccupied apartments were actually occupied.

By providing that false information, Ogiony and others induced the financial institutions to issue loans that were either for larger amounts than the financial institutions would have authorized had they been provided with truthful information or that the financial institutions would not have issued at all had they been provided with truthful information.

In one instance, Ogiony and others provided false information to Berkadia Commercial Mortgage in connection with The Rochester Village Apartments at Park Place, a multifamily apartment complex owned by Morgan Management principals.

According to court documents, that information included falsely inflated income from storage unit rentals, false reports of rental income, and falsely reporting apartment units as occupied before certificates of occupancy were obtained for those units.

In all, Oginony admitted to providing false information about the following properties:

  • The Preserve at Autumn Ridge, Watertown, NY
  • The Eden Square Apartments, Cranberry Township, Pennsylvania
  • The Rochester Village Apartments at Park Place, Cranberry Township, Pennsylvania
  • The Reserve at Southpointe, Canonsburg, Pennsylvania
  • 7100 South Shore Drive Apartments, Chicago, Illinois
  • The Avon Commons Apartments, Avon, NY
  • The Morgan Bay Apartments, Houston, Texas
  • Brookwood on the Green, Syracuse, NY
  • The Creek Hill Apartments, Rochester, NY
  • Hickory Hollow, Rochester, NY
  • The Knollwood Manor Apartments, Rochester, NY
  • The Links at Centerpointe, Canandaigua, NY
  • The Nineteen North Apartments, Pittsburgh, Pennsylvania
  • The Overlook at Golden Hills, Lexington, South Carolina
  • The Penbrooke Meadows Apartments, Rochester, NY
  • The Trails of North Hills Apartments, Raleigh, North Carolina
  • The Rivers Pointe Apartments, Syracuse, NY
  • The Union Square Apartments, Rochester, NY
  • The View at MacKenzi, York, Pennsylvania
  • The Villas of Victor, Rochester, NY

Ogiony will be sentenced at a later date and faces a maximum penalty of five years in prison and a $250,000 fine.

Kevin Morgan was previously convicted of conspiracy to commit bank fraud and is awaiting sentencing. Charges remain pending against Giacobbe and Todd Morgan.

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Do home equity loans affect your credit score?

Despite record amounts of home equity, fewer homeowners are tapping into this source of wealth. While a number of factors contribute to this fact – including tightening lending standards – could concerns about a home equity loan’s effect on credit score play a role?

To determine the impact a home equity loan could have on a borrower’s credit profile, LendingTree analyzed data from 2,500 consumers to see how their credit scores changed in the months after they took out a loan.

The report found that borrowers saw their credit scores decline by an average of just 13 points. According to LendingTree, because the average credit score of borrowers was 735 to start, such a decline would have a negligible impact on access to credit and would only marginally increase the cost of credit.

LendingTree also noted that it took about 60 days after closing or longer for the loan to show up on a borrower’s credit report.

The decline in credit score took an average 158 days to reach its lowest point, and then about 163 days to recover completely, meaning that the complete cycle to return to the original credit score was 321 days, or less than 11 months, the survey found.

Why is a borrower’s credit score affected at all?

LendingTree says scoring agencies take into account the total amount of money a consumer owes, and the presence of a large line of credit drags down that score, although with less weight than a large increase in outstanding debt.

But, over time, the impact is lessened, LendingTree says.

“Making on-time payments helps a borrower improve their credit score as they demonstrate they are managing their new home equity loan account well. If it is a home equity line of credit and the borrower does not use the full credit line, their credit utilization ratio falls – which also boosts their credit score,” LendingTree notes. “Having a home equity loan also increases the diversity of accounts in the credit file, which boosts the score as well. Eventually, the score returns to its pre-loan level, and in most cases surpasses it.”

Here is a chart ranking cities by average decline in credit score as a result of a home equity loan:

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Goldman Sachs is going to hire more women

Goldman Sachs announced it is expanding its year-old program to add more diverse employees to the company worldwide, according to an article from CNBC.

CNBC’s Hugh Son reports the big bank says that half of its new analysts and entry-level associates must be women. The bank also, for the first time, issued goals for it to meet in hiring black and Latino employees.

From the article:

The firm has set “aspirational goals” of having half of all new analysts and entry-level associates hired in the U.S. be women, 11 percent black, and 14 percent Latino, according to a staff memo sent Monday. The firm set a lower goal for black hires in the U.K., where it is seeking 9 percent level.

By increasing the ranks of women and minorities at entry-level positions — analysts and associates are the two most junior job titles in Wall Street’s hierarchy — Goldman is hoping to improve diversity across the firm over time. More than 70 percent of new hires are at the analyst and associate level, the bank said.

Goldman, like Wall Street overall, is dominated by white males, particularly at senior levels. About 60 percent of the bank’s U.S. employees are white, while 38 percent are female, 5.4 percent are black and 8.5 percent Latino, according to the firm’s most recent disclosure. When it comes to top managers, 80 percent are white, 22 percent are female, 2.9 percent are black and 4.3 percent are Latino.

According to CNBC’s reporting, the memo sent to staff on Monday outlines some very ambitious goals for the bank, but they are not unattainable, according to the bank’s senior leaders. According to the article, CEO David Solomon and two deputies said in the memo that the targets “are aspirational, we have access to an incredible talent pool and believe they can be achieved.”

According to the memo, the bank is also looking at new ways to further representation of LGBT, disabled and veterans communities across the company’s workforce.

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Homebuilders advise some-more affordable supply could be on a way

Mortgage activity mislaid some steam during a finish of a year as aloft home prices and prior expansion in rates pushed down home sales. But a slack helped stabilise a housing market, and consumers could see some-more affordable home register on a market, according to a National Association of Home Builders and Wells Fargo.

“In a healthy pointer for a housing market, some-more builders are observant that reduce cost points are offered well, and this was reflected in a government’s new-home sales news expelled final week,” pronounced NAHB Chief Economist Robert Dietz in a press release.


“Increased register of affordably labelled homes — in markets where supervision policies support such construction — will capacitate some-more entry-level buyers to enter a market,” he said.

Starter home register has been quite parsimonious as homeowners continue staying put longer and opt to reconstruct rather than pierce into another house. Homebuilders, struggling with construction costs and aloft prices for land, tend to arise houses during aloft cost points to make a profit. But justification that lower-priced homes are doing well, atop a cooling in cost appreciation, helps incentivize builders to emanate some-more affordable supply.

This also comes during a time when debt applications for new home purchases are on a rise.

Builder certainty in a housing marketplace hold solid during a reading of 62 in March, according to a NAHB and Wells Fargo’s Housing Market Index, where a value over 50 means some-more builders perspective conditions as good than poor. Builders also design a clever open home shopping deteriorate ahead.

Despite this, affordability stays a tip jump for homebuilders, and shortages of workers, buildable lots and parsimonious zoning restrictions — quite in large cities — continue to plea them as they aim to emanate entry-level inventory, according to NAHB.

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Homebuilder view solid as sales and opinion improve

Sentiment among homebuilders hold plain in March, nutritious a miscarry from a new three-year low on alleviation in sales and a brighter opinion for a subsequent 6 months.

The National Association of Home Builders/Wells Fargo Housing Market Index was unvaried during 62, yet only subsequent a median guess for 63 in a Bloomberg survey, information expelled Monday showed. Readings above 50 prove some-more builders perspective conditions as good than poor.


Bloomberg News

The stabilization following a Dec reading that was a weakest given 2015 shows builders are some-more upbeat amid a many auspicious debt rates for buyers in some-more than a year and a historically strong pursuit market. Two of a 3 subgauges increased, with measures of benefaction sales of single-family homes and a opinion for purchases over a subsequent 6 months both rising to a top levels given October.

The upbeat assessments might vigilance a housing attention is jolt off a array of downbeat reports from opposite a zone as consumer view improves and a Federal Reserve pledges to sojourn studious on serve interest-rate increases. One disastrous sign: The subgauge of patron trade decreased to 44 from 48, suggesting impending buyers are still confronting barriers to affordability.

Other new information showed Jan existing-home sales, that contain a bulk of a market, were during a slowest gait given 2015, while new-home sales fell to a weakest gait given October. Builders news lower-priced homes are offered well, yet affordability still stays a regard as developers confront hurdles such as a necessity of learned workers, miss of buildable lots and zoning restrictions, NAHB said.

“Builders news a marketplace is stabilizing following a slack during a finish of 2018 and they expect a plain open home shopping season,” NAHB Chairman Greg Ugalde, a homebuilder and developer in Connecticut, pronounced in a statement.

Three of 4 geographic regions improved, led by a Northeast, that rose to 52, a top given November. The South and West also gained while a Midwest slumped. The Washington-based trade organisation represents some-more than 140,000 members in areas trimming from building and subcontracting to pattern and housing finance.


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Freddie Mac’s change to fixed-rate private chain snares muni interest

The Federal Home Loan Mortgage Corp. expects to daub direct from metropolitan marketplace investors for a initial fixed-rate understanding in a sovereign taxation free loan module for affordable multifamily properties.

Lead manager Wells Fargo skeleton to cost a $266 million private-placement of securitized loans this week by a supervision sponsored craving ordinarily famous as Freddie Mac.

That understanding will primary a siphon for another $2.5 billion in loans Freddie Mac skeleton to securitize in a subsequent dual to 3 years, pronounced Peter Cannava, a handling executive in Wells Fargo’s open financial housing group.

“This is a flagship taxation free module to financial affordable housing,” pronounced David Leopold, a clamp boss for targeted affordable sales and investments during Freddie Mac. “We rolled it out a integrate of years ago and it has been gaining traction ever since.”

David Leopold, clamp boss for targeted affordable sales and investments, with Freddie Mac.

“This is a flagship taxation free module to financial affordable housing,” pronounced David Leopold, a clamp boss for targeted affordable sales and investments during Freddie Mac.

The prior offerings were sole as floating rate holds though a liquidity encouragement and drew some-more seductiveness from structured financial investors, Cannava said. Municipal investors are meddlesome in a deal, since it’s bound rate and muni investors were not meddlesome in purchasing floating rate debt though a liquidity enhancement, he said.

“There has been a lot some-more seductiveness from muni investors than in a initial 4 deals,” Leopold said.

Freddie Mac expects to do dual to 3 of these deals a year totaling $1 billion over a subsequent few years, Leopold said.

Freddie Mac has estimated it gets a 40% rebate in shutting costs by private placements instead of credit-enhanced bonds.

“The loans aren’t rated, so we don’t have to get a rating,” Leopold said. “You also don’t have to have an underwriter safeguard a bond and sell it to a market. There are fewer parties involved, so a authorised costs are lower. The support also uses a customary set of template documents, that helps keep costs down.”

Freddie Mac launched a module in 2014 as a cost-effective choice to bond credit enhancement. The government-sponsored craving did not began securitizing a loans until 2017, Leopold said, since it customarily buys loans on affordable housing construction or reconstruction projects once they have been stabilized.

Through a program, Freddie Mac is purchasing and securitizing income holds released by state and internal supervision housing financial agencies as a passage issuer for affordable housing developers and owners, Leopold said.

“Most of a loans are to reconstruct housing batch that was sleepy or obsolete,” Leopold said. “The improvements do dual things, move a product adult to marketplace standards to emanate improved peculiarity housing and it extends a affordability duration on those units. The unit owners customarily have a 30- to 50-year compact to keep a units affordable underneath agreements with internal governments.”

The deal, called ML-05, is a fourth charity of taxation free loans and a fifth charity of ML certificates in a program. This financing provides appropriation for housing in California, Washington, Texas, Utah and Florida.

Freddie Mac released floating rate bonds, since there was a large marketplace for them, though now a “market has shifted and we have shifted with it,” Leopold said.

Given a figure of a produce curve, it doesn’t make clarity to sell floating rate notes, Cannava said. It’s improved to close in bound rate debt.

The certificates behind 21 taxation free loans and will be separate off in dual tranches, a $97.6 million tranche including customarily a California paper and $168.4 million pool for all a other loans.

By bursting off California, investors in that state can advantage from a state as good as a sovereign taxation exemption, Leopold said.

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Here’s the tech you need for a proactive customer retention strategy

Intelligence is the difference between facts and knowledge, between information and understanding. Although artificial intelligence and machine learning are popular buzzwords in the mortgage industry today, truly machine intelligence based solutions are still a rarity in our space. Fortunately for lenders and servicers, Quantarium is bucking that trend.

The company approaches real estate from a distinctly scientific perspective, reflecting its founders’ backgrounds in high-end technology, quantum physics and computational genetics. As co-founder and Quantarium CEO Clement Ifrim explained, the company’s understanding of the market and its development of solutions is different from other companies not just in degree, but in kind.

“The word quanta describes the smallest entity involved in any physical interaction. Similarly, our initiative from the first days of our company was to use all this data — the smallest pieces of information — meshed with machine intelligence to provide the most accurate solutions on the market,” Ifrim said.

Quantarium’s robust artificial intelligence is a result of the methods the company leveraged from the beginning, applying machine learning solutions, such as neural networks, evolutionary programming and genetic  algorithms to understand both individual assets and local market dynamics within  the housing market. The company’s ambitious goal was to discover the DNA of real estate by mapping out its chromosomes — the up to hundreds of property characteristics of each asset — and determining how their proportional usefulness, along with the local market environment defined its expressed phenotype, impacting the estimated value..

Using this approach, Quantarium can credibly claim true AI, as its models behave like living systems.

“Our valuation system is constantly evolving and learning. Combined with our unparalleled data lake, our valuations get more accurate with each new run. Similarly, with our portfolio services, we are generating predictive models that get better every single day,” Ifrim said.

Quantarium’s offerings include its automated valuation model, QVM, valuation services, portfolio services, and a data and search platform, which was developed by mathematicians, scientists and computer architects — many of whom formerly worked on Microsoft’s enterprise services.

Romi Mahajan, the commercial head of the company, said, “Quantarium is a ‘meaningful AI’ company — we use AI not for some abstruse solution in search of a problem but instead to create markets and enhancements in the world’s largest asset class, namely residential real estate.”  

For servicers in this low-volume purchase market, Quantarium’s portfolio services are especially critical as part of a proactive strategy to retain customers. For the last several years, servicers could count on moving borrowers into refinance loans and having enough new customers that they weren’t concerned about retention. Today, servicers need portfolio solutions that identify ongoing opportunities to engage homeowners as they contemplate selling, refinancing or taking cash out — before they start looking.

With Quantarium, servicers can leverage automated vigilance to see market activity on any loan in their portfolio, giving them the ability to contact borrowers with new offers. They can also gain insight into a borrower’s current status — such as whether they have paid off a loan and still live in the house, sold the property or refinanced with another lender. It also surfaces new lien activities.

Additionally, Quantarium’s best-in-class portfolio services can identify borrowers who are likely to list their property, or refinance.

“We can look at a borrower and say, ‘Do we think this person because of age, job, age of children, etc. is a good cash-out candidate? Or maybe a consolidation candidate?’ Servicers can take a segment of their portfolio and send a very specific message to that group,” Ifrim said.

Brian Mushaney, Quantarium’s business development vice president commented further, “Leveraging AI models, allows us to move loan loss beyond simple analysis, so our customers can further understand attrition from their lost customers’ loan purpose perspective and respond accordingly.”

Servicers and investors can also use Quantarium’s geocentric property reports to spot neighborhood trends in sales prices and demography, view comprehensive transaction history and get sales comps.

“We provide servicers with a statistical analysis of what’s happening in a borrower’s neighborhood, so they can stay in meaningful contact with the borrower, edified to both their individual and market context, all the time. They might see that homes in a particular micro market have increased beyond certain thresholds  and now they can let the borrower know that, current transforming asset and market circumstance  have made them candidates for products within the servicers portfolio that can optimize the borrower’s position,” said Malcolm Cannon, Quantarium’s chief operating officer.

Quantarium leverages data from more than a dozen data services, but it also creates new data all the time, using machine learning methods, such as computer vision to add property characteristics and then understand how they impact quality and value, expanding the reach of its intelligent systems.

“We begin by sitting down with our customers to find out where their pain points are, then we get our AI scientists together to figure out the solution. If you have a question, we have the data to answer it,” Ifrim said.

“We’re so excited about the potency of what Quantarium does — it’s unparalleled,” Cannon said. “We are working with the best tech companies in the world to stay on top of innovation and provide the best possible services for our clients.”



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