The Risks and Rewards of Innovation
Risk is the price of innovation, and even the most brilliant endeavors can fall short a result of immutable factors. However, there is a difference between an unsuccessful endeavor and one that was not successful enough, and any degree of success can offer lessons for the future.
This was ultimately the case for Fraud Analysis Control Technologies (FACT) at the peak of the U.S. mortgage crisis. During the crisis, the real estate industry was caught unprepared by a wave of Fraud for Profit schemes that exploited real estate legal and financial processes, such as duplicate mortgages and loans on nonexistent properties. FACT was established with the goal of developing a product to detect and prevent these fraudulent practices, which posed unique challenges. The product would need to be implemented amidst the ongoing crisis, and with input from various organizations with distinct relationships to the crisis.
Through inclusive collaboration with mortgage bankers and brokers, federal law enforcement, attorneys general, and consumer protection agencies, FACT co-founder and CMO Troy Glick successfully designed a fraud prevention product that galvanized members of Congress to endorse HR-5941 Anti-Redlining and Anti-Mortgage Fraud Act of 2010. The proposed act would require the recording of mortgage applications for single-family residences, effectively preventing Fraud for Profit schemes. Some of the tenets of the clearinghouse included sequential processing, previous application identification, and property and person validation.
Unfortunately, despite the considerable effort invested by FACT and the theoretical success of the product in mitigating the mortgage crisis, HR-5941 did not make it past the congressional committee. However, falling short of their goal did not undermine their efforts or innovation; regardless of application, FACT balanced input from various organizations to design a product that would accomplish its goal in a complex and high-stakes environment. Such endeavors have intrinsic value by inspiring or motivating greater successes in the future. There is potential for growth in every success, near miss, and even failure; there is no potential at all in a chance untaken.