Honor In Data & Analytics
Black Knight is Dedicated to Giving Investors the Most Transparent Market Possible
By Carole VanSickle Ellis
In Arthurian legend, the recurrent motif of the Black Knight is brave, exceptionally strong, and highly dynamic. In the modern day, the Army West Point Black Knights represent the United States Military Academy and prize similar character traits including courage, justice, mercy, generosity, faith, nobility, and hope. While the archetype may be centuries old, Black Knight Inc. chairman emeritus Bill Foley confidently chose the name to represent the values of the company in 2014, explaining his vision for the business included a reflection of the values of his alma mater, West Point, in the company’s business practices. In a modern world where data is constantly manipulated, adjusted, and curated until many investors find themselves unable to trust even the most basic of metrics, the property data and analytics provider finds that a “code of honor” in the industry is more important than ever.
“People need property information, property data, and products related to that information whether in the form of valuation tools, risk management tools, decision-making tools or just raw data to feed into models and analytics,” explained Richard Lombardi, senior vice president of data strategy and innovation at Black Knight Inc. “Black Knight is the leader in providing that data and helping clients and consumers understand it.”
Because Black Knight’s property data database covers 99.9 percent of the U.S. population and households and every record is updated and verified regularly, the company is not just a source of information for individual investors and investment firms; it also provides the raw data used across thousands of specialized service and analytics platforms across all sectors of real estate. In order to serve its broad spectrum of clients in extremely customized ways, Black Knight is divided into four divisions: Origination Technologies, Servicing Technologies, Secondary Markets, and Data & Analytics. The company’s Data & Analytics group, in which Lombardi works, uses the conglomeration of information to help clients make their own specific projections about markets and strategies as well as identify emerging trends that could affect future business. While it might seem like a simple process since much of that data is available in the public record, Lombardi emphasized Black Knight systems must work in perfect accord in order to generate actionable data and datasets.
“We go to more than 3,000 counties and confirm that more than 3,000 different sets of data match together,” he explained. “We are not just licensing that data to clients; we are standardizing it, cleansing inaccuracies, and matching it back so that all the different points related to a property that come from hundreds of different sources are matched together and verified.”
Clients use this information for a vast array of purposes, including analytics, modeling, scoring, and valuations within their own businesses, evaluating existing and potential economic impact, and tracking commercial trends. “Real estate touches nearly every aspect of the market and economy,” Lombardi said. “You can use information about specific properties and groups of properties to understand what is going on in the larger market and other market sectors. Our data is even used in making insurance decisions, implementing marketing strategies, and creating video games,” he added.
Drawing Out the Data Story
With so much data to work with, clients can easily find themselves overwhelmed with information. That is where Julian Grey, executive vice president of Black Knight’s Data & Analytics division, comes into the picture. Her team deals with the evolving and complicated processes associated with analyzing and drawing actionable conclusions from datasets in ways that still permit the clients to draw their own conclusions.
“Investors trying to find insight within data are really looking for a ‘story’ that can help them decide on an action to create a desired return,” Grey explained. “We knew early on that we needed advanced platforms to support the consumption of advanced data and analytics, but they simply did not exist in the form we needed. So we built one.”
Black Knight’s Rapid Analytics Platform is the company’s answer to investors’ need for a vast array of “stories” that all may be derived from the same massive datasets.
“The platform houses nearly every one of our datasets and allows users to find the information that best suits them at the right time,” Grey said. “Then, they can extract and leverage that data in multiple ways depending on their needs. That flexibility is by design.”
The platform does not just permit extraction of data, however; it also enables users to create sets of predictive data that can help them refine future investment strategies and make informed investing decisions.
“I find predictive analytics to be particularly exciting since they’re so key to making informed business decisions,” Grey said enthusiastically. “Our platform combines descriptive analytics – which help users understand what’s already happened – with predictive data that can be used to map out different scenarios. Doing so can help an investor predict what might happen to an individual property, to mortgage and market trends in general, or even where the real estate and mortgage industries might go in the future.”
The enormous datasets must be constantly updated and confirmed, evaluated and analyzed, and, additionally, scrupulously curated and maintained to ensure that anonymous data remains fully anonymized. The vast amounts of information available on trends and changes in the market and economy that come as a result of collecting data from both public sources, like the public record, and private, anonymized sources, like mortgage performance records, is invaluable.
However, Grey emphasized, there is a “trade-off” that investors must make in order to gain these powerful insights.
“You simply cannot sacrifice privacy to achieve transparency in the market,” she said. “When you work with the volume of data Black Knight accesses and aggregates daily, you have an obligation to ensure you are a strong and resolute guardian of that information.”
Often, data providers attempt to anonymize data by simply putting it all in one place and removing key information, such as names and physical addresses, from the dataset.
However, this is not necessarily fully anonymized data because someone viewing the data with the right pieces of additional information, such as details from a loan portfolio containing loans in that dataset, may still be able to make specific decisions about an individual property in that set using a combination of information from the portfolio and information from the “anonymized” dataset.
At this point, these decisions may constitute an invasion of privacy and even be illegal. This puts an investor using an incompletely anonymized dataset at risk as well as the borrower or other individual whose privacy has been violated.
“It’s entirely possible to create robust and fully anonymized data that can be used to build predictive models that show how certain types of loans will perform without violating any individual’s privacy,” Grey noted. “But you need the right platform to make that happen.”
She explained that Black Knight uses a combination of meticulously anonymized data and details on geography, national trends, and loan performance to protect individuals while helping clients identify important changes in the market.
Leveraging Predictive Data in Real-Time Decisions
Perhaps one of the most powerful strategies for leveraging Black Knight’s data combines predictive data analytics with real-time, real-world events. Gunnar Blix, director of data strategy, is focused on the process of optimizing the value of Black Knight data. “In data strategy, our role is primarily thinking about how to pull data into the organization, make it as valuable as possible to the client, and then distribute it in ways that ensure the industry is getting the information it wants and needs in order to perform and serve consumers even better,” Blix said.
At present, Blix’s department is looking closely at climate risks and the effects of climate-related events on real estate. Traditionally, this type of modeling has been largely confined to concerns about whether properties are in flood plains or future flood plains and if certain areas of the coast may, at some point, be flooded by seawater. However, Blix explained, there is a lot more to climate-related data than simply making predictions about when and how much sea levels will rise.
The company recently released a disaster-alert solution designed to help investors and institutions identify properties that have likely been directly affected by what Blix refers to as “natural hazard events” like flooding, fires, or extreme weather. Using this solution, lenders and investors may know within the space of about two days whether a certain subset of properties or loans in a portfolio have been impacted by a disaster, saving time and resources best spent on mitigating and reducing any potential damage to the properties.
“When FEMA flags a county as a disaster area, for example, that can sweep up thousands of assets at risk,” Blix said. “Being able to narrow down the number of homes that have been actually affected and then reach out to clients and affected parties to determine what assistance they might need is much more efficient than going through the entire county, property by property.” He concluded, “Data is not just about projecting into the future. A lot of it is in use already, today.”
Much of this data is also useful when leveraged in the Rapid Analytics Platform to explore how certain types of disasters and hazards might affect a specific portfolio of properties or loans.
Many clients take the raw data from Black Knight, use a variety of evaluative methods on the Rapid Analytics Platform to sift through the information, and then create highly specific codes and practices based on the results of the initial process.
“It is really a matter of getting as much information as we can to help clients make good decisions as investors and for consumers,” Blix said. “In today’s market, everyone is competing for data and information. The more data you have and the more accurate that data is, the better your decisions will be as a result.”
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Powerful Tools for Pandemic and Post-Pandemic Investors
Investors tracking changes in health policy nationally may have already noticed a new adjective creeping into the economic and health policy lexicons. The word is “endemic.” Defined by epidemiologists as “a disease outbreak that is consistently present but limited to a particular region,” some virologists are suggesting that the COVID-19 pandemic may, at least in some parts of the world, become more of an endemic issue in the coming years.
While pandemic events are characterized by exponential spread of an infection, endemic events can be devastating but tend to be more isolated and have a smaller relative spread. Thus, market changes associated with endemic events may be more predictable and localized, over time, than sweeping pandemic-related trends. Should COVID-19 become endemic in the United States, it will be imperative that investors have the ability to track real-time changes in markets that are affected both by viral outbreaks and by swiftly changing, often controversial economic and health policies.
In a period of uncertainty for most data analysts, Black Knight’s unique combination of descriptive and predictive data analytics places the company in a prime position to help investors make sense of the madness in today’s pandemic market and make educated predictions about what might happen throughout various market sectors and even regional economies in the future.
Although Black Knight analysts seldom, if ever, are willing to make overt predictions about the future, they are expertly equipped to comment on trends, narratives, and bellwether events that might be of interest to clients and investors.
“Stories in data are told by change,” observed Julian Grey, Black Knight’s executive vice president of data and analytics. She explained that even in extremely stable markets, changes in expectations or stable factors can indicate the “story” in the data is about to change.
“Data reflects human behavior; human behavior reflects the story,” she said, citing as an example homeowners’ decisions around loan prepayment. “When you see interest rates drop and borrowers continue to prepay loans, that has one set of implications that is very different from the implications of a drop in interest rates accompanied by a lack of prepayments from borrowers,” Grey said. “A source-data provider like Black Knight is usually able to see and interpret that ‘story’ first and be very thoughtful about how we interpret it.”
Grey cited default data and mortgage performance data as treasure troves of “hidden gems” of information for real estate investors. “Home price datasets and mortgage performance datasets are great reflectors of human behavior,” she said. “This information reveals so much about how communities, markets, and assets are impacted by economic events that are out of their control. It gets to the root of why people are doing what they are doing in a market.”
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Sifting Through the Data Sandbox
What VP of Market Research Andy Walden is Watching
When Andy Walden, Black Knight economist and vice president of market research, talks about his job, he describes it in a lighthearted manner. “I have the enviable task of playing around in the Black Knight data sandbox,” he said
Walden emphasized that the data behemoth is not in the business of making specific market predictions but, instead, enabling clients to identify powerful trends and indicators relevant to specific investment and business strategies. That being said, the chance to hear from the host of the monthly Mortgage Monitor webinar and one of HousingWire’s 2021 “Rising Stars,” about the data he finds particularly intriguing is an opportunity not to be missed.
“There are a couple of key things going on in the market right now that will play out over the next 6 to 12 months,” he began, explaining that his team expects housing finance and mortgage performance data to come to the fore as market indicators in 2022.
“How borrowers perform after leaving forbearance will affect foreclosure volumes and the downstream housing market,” he said.
Walden is also watching how individual housing markets may begin transitioning from being extremely hot to cooler conditions. “We are starting to see home price growth come down off record highs, and our Collateral Analytics data suggests that could continue in coming months,” he said, noting that Federal Reserve tapering efforts could accelerate a housing transition. Together these factors could combine to firm up a cooling trend in 2022. “The coming months will quite likely bring rapid changes to the housing market,” Walden concluded. “But rather than the plunging property values associated with the Great Recession, we’re poised to see more of a deceleration in the rate at which prices continue to climb.”
Walden recommended investors not only listen to economists and analysts for insights on the housing market and economy; he recommended certain “key ingredients” to track as well. “Real-time data is what sets us apart here at Black Knight,” he said. “We are blessed to have real-time data on rate locks, mortgage performance, and housing market trends that provide insights into the mortgage and real estate markets as they happen. It gives folks that utilize Black Knight data a leg up on their competition because they are not guessing about the market; we see what is taking place before others can see it.”
Access Black Knight’s monthly Mortgage Monitor at BlackKnightInc.com/Data-Reports.
