Kirk
Donaldson
is
no
stranger
to
solving 
problems.
As
the
CEO
and
founder
of
Halcyon,
Kirk
has
spent
over
two
decades
building
solutions
that
help

lenders
operate
with
more
confidence
and
less
friction.
His
latest
venture
brings
a
solution
to
one
of
the
industry’s
biggest
headaches:
income
validation.
In
this
executive
conversation,
Kirk
explains

why
so
many
post-close
income
validations
fail,
how
Halcyon’s
partnership
with

Fannie
Mae
tackles
that
issue
at
scale,
and

what
lenders
can
gain
from
moving
away
from
outdated
processes.

HousingWire:

Your
most
recent

press
release
highlights
a
major
milestone:
Halcyon
being
one
of
the
first
to
launch
Fannie
Mae’s
new
Income
Calculator
using
IRS
transcripts.

But
there’s
a
deeper
issue
behind
this
integration
—
struggles
with
income
validation.
How
widespread
is
this
problem
across
the

industry,
and
what
made
Halcyon
decide
to
tackle
it?

Kirk
Donaldson:

Our
story
is
quite
funny,
we
didn’t
set
out
initially
to
solve
this
problem
at
all,
but
happened
to
be
in
the
right
place
at
the
right
time.
Our
company
initially
started
out
exclusively
in
the
tax
preparation
space
and
in
doing
the
development
work
for
automating
tax
preparation,
the
transcript
inefficiencies
in
mortgage
almost
hit
us
over
the
head.
The
traditional
route,
with
its
high
failure
rates
and
transactional
nature,

allowed
us
to
leverage
the
same
process
we
needed
for
tax
preparation
and
parley
into
a
better
user
experience
for
the
industry
as
a
whole.
Our
authorization
spans
form
types
and
years,
facilitating
a
much
more
efficient
data
exchange.

HW:
Six
out
of
ten
post-close
income
validations
fail,
which
can
lead
to
repurchases
for
lenders.

How
does
Halcyon’s
approach
solve
this
problem
in
a
way
others
haven’t?

KD:
With
our
approach,
the
borrower
gives
consent
for
an
authorization
on
file
at
the
IRS,
so

the
post-close
QC
issues
go
away.
The
transcript
data
can
be
provided
without
worrying
about
the
expiration
or
data
quality
of
the
form
i.e.
the
4506
included
in
a
closing
package
and
whether
it’s
outside
of
the
120-day
period,
all
issues
that
attribute
to
the
validation
failure.
This
provides
assurances
to
the
buyers
and
sellers
of
the
mortgages
along
with
the

GSE’s
that
information
can
be
independently
verified
with
less
than
a
1%
failure
rate
to
adhere
to
their
respective
selling
guides.

HW:
This
seems
like
more
than
a
tech
update.
It
feels
like
a

larger
shift
in
how
lenders
and
GSEs
validate
income.
What
implications
does
this
have
for
the
future
of

underwriting
processes
and
lender-GSE
relationships?

KD:
Well,
for
starters,

there’s
no
manual
intervention
so
you
are
only
dealing
with
source-of-truth
data.
Human
intervention
at
best
leads
to
manual
data
entry
errors
&
at
worst
opens
the
GSE’s
up
to
potential
fraud.

Our
solution
is
direct,
unaltered,
and
therefore
bedrock. 
Underwriting
can
be
simplified,
costs
can
be
lowered,
and
everyone
can
align
on
a
single
source
of
data.

HW:
You’ve
integrated
Fannie
Mae’s
Income
Calculator
directly
into
the
Halcyon
platform.

What
does
that
look
like
for
underwriters
and
processors
in
their
day
to
day 
—
and
how
does
it
differ
from
traditional
processes?

KD:
A
lot
changes
for
the
better.
Currently
processors
are
getting
tax
returns
scanned
and
uploaded
by
the
borrower,
then
sending
them
off
for
OCR,
someone
manually
checks
the
OCR
—
it’s
messy,
takes
too
long
and
introduces
errors.
With
the
new
transcript-only
calculator,

the
data
comes
directly
from
the
IRS,
error-free,
and
often
in
minutes.
This
data
automatically
populates
a
handful
of
calculators,
including
Fannie
Mae’s
and
customized
ones.

There’s
no
fat
fingering,
no
typos.

A
borrower
can
land
on
your
website,
and
potentially,
within
15
minutes
you
can
have
an
income
calculation,
using
validated
data
with
the
ability
to
try
different
loan
products.

HW:
There’s
growing

pressure
across
the
industry
to
modernize
outdated
processes.
How
is
Halcyon
addressing
these
needs
for
both
traditional
and
self-employed
borrowers?

KD:
We
came
from
the
OCR
business
in
a
prior
life
and
it
is
an
outdated
process. 
Starting
with
the
JSON
and
assessing
what
is
missing
that
isn’t
available
on
a
transcript
has
started
making
the
industry
question
the
value
vs.
the
effort. 
We
like
to
joke
that
the
effort
required
to
try
to 
“automate”
for
the
day-trading
miner
with
17
rental
properties
by
OCR’ing
the
tax
return
to
get
each
rental
address
and
percent
depletion
might
not
be
a
good
use
of
technology
rather
than
assessing
what
can
be
rationally
analyzed
with
minimal
effort. 

The
policies
are
being
questioned
for
the
first
time
in
a
very
long
time
because
there
are
real
questions
about
the
tradeoff
between
additional
cost
and
actual
value
provided. 
We’re
not
suggesting
the
criteria
is
any
less
comprehensive
but
simply
whether
the
way
it’s
always
been
done
still
makes
sense
with
better
modernization.

HW:

What
is
Halcyon
doing
to
stand
apart
from
the
other
vendors
in
this
space
and
are
there
any
other
innovative
products
you’re
bringing
to
the
market?

KD:

We
have
only
scratched
the
surface.
Tax
transcripts
were
a 
pain
point
for
lenders,
and
a
cash
cow
for
vendors.
Look
how
fast
that
has
changed.
We’ve
delivered
transcripts
in
under
a
minute,
and
at
a
far
lower
price
point.
We’ve
invested
heavily
in
borrower-led
approval
and
our
income
analyzer,
and
the
industry
is
starting
to
discover
how
powerful
these
tools
are
when
they
are
working
together;
Validated
and
Calculated
self-employed
income
eligible
for
Reps
and
Warrants
within
minutes
and
at
a
fraction
of
the
cost. 
This
is
all
a
small
part
of
the
innovation. We’ve
also
recently
launched
SigSign
which
is
our
digital
signature
platform
with
real-time
identity
verification.
Originally
built
to
support
non-mortgage
clients
lacking
disclosure
packages
for
consent
authorizations,
the
product
has
broad
applicability
across
industries
to
capture
early
identification
fraud
off
server
for
pennies
on
the
dollar.
Commoditizing
these
services
to

reduce
the
manufacturing
cost
of
originating
a
loan
is
our
goal,
which
ultimately
serves
the
borrowers.