Join us on LinkedIn Follow us on Twitter Like us on Facebook Follow us on Instagram
 
  OCTOBER RESEARCH STORE Already a subscriber? LOG IN
AddControlToContainer_DynamicNavigation6

Trade groups respond to FHFA RFI on fintech in housing finance

Email A Friend Printer Friendly Version
0 comments
Emerging Technology, Government Oversight, Nonbank Financial
Friday, November 4, 2022

In July 2022, the Federal Housing Finance Agency (FHFA) issued a request for information (RFI) regarding the future role of fintech in housing finance. Following one extension, the comment period ran through Oct. 31, 2022.

This RFI was done in conjunction with the creation of a new office within FHFA, the Office of Financial Technology. Since being sworn in earlier this year, FHFA Director Sandra Thompson has been vocal in advocating for better use of technology in the mortgage industry. This has included some criticism of the industry’s reluctance to adopt technology, including recent statements the mortgage industry is “20 years behind.”

“Relative to other consumer finance markets, many mortgage market processes remain largely complicated, manual, and confusing, making them ripe for further innovation,” the RFI read. “Fintechs are changing how housing finance firms originate, underwrite, process, close, service mortgages, and perform loan quality control. Fintech can affect every phase of these mortgage processes, including how firms identify potential borrowers, verify data, appraise properties, and verify title, as well as how firms interact with each other, with customers, and with regulators.”

Through the RFI, FHFA sought information relating to how industry participants understood and utilized fintech. Specifically, FHFA sought information regarding four subtopics:

  • The role of fintech in the ecosystem in which residential mortgages are originated.
  • The role of fintech in the secondary mortgage market.
  • The associated risks with the use of fintech.
  • The application of fintech to compliance and regulatory activities.

The RFI garnered responses from a variety of trade groups, including Mortgage Bankers Association (MBA), American Land Title Association (ALTA), Independent Community Bankers of America (ICBA), and National Association of Federally-Insured Credit Unions (NAFCU), offering information and suggestions on the matter.

“Multiple market participants, including lenders and technology vendors, are actively striving to provide solutions and meet their customers’ needs,” wrote MBA President and CEO Robert Broeksmit as part of MBA’s response to the RFI. “FHFA should ensure that it listens to many voices as it contemplates influencing the direction of the technology ecosystem.”

The MBA response to the FHFA RFI centered on five key themes:

  • It is important to understand the industry’s recent history and experience with respect to technology adoption and innovation, and the current focal points for single-family and multifamily lenders when it comes to technology expenditures.
  • Fannie Mae and Freddie Mac (the “GSEs”) have an important role to play with respect to the direction of technology within the mortgage industry, but they need to work collaboratively with the industry to ensure that solutions work beyond GSE-specific use cases.
  • Data is the source of financial innovation. Without access to data, innovation is hindered. FHFA should endeavor to open up access to data to spur innovation.
  • Standards can accelerate innovation in myriad and unexpected ways. FHFA and the GSEs should avoid proprietary solutions and utilize MISMO to develop collaborative, standards-based approaches to issues affecting the mortgage ecosystem.
  • FHFA and the GSEs do not need to solve fintech. Helping to identify issues, their root causes, and collaborating on solutions that work for the entire mortgage ecosystem will be a successful outcome of this initiative.

When it comes to innovation and technology in housing finance, ALTA told the FHFA that the primary focus should be on initiatives that improve the overall experience for the consumer, reduce costs in the process or lower the risk to the parties involved.

ALTA recommended FHFA put particular emphasis on innovation initiatives that address the needs of all homebuyers and protect the privacy of consumers. Innovation that evades established regulatory frameworks or compromises security or privacy should not be considered, according to ALTA.

Promotion of attorney opinion letters in lieu of title insurance in certain circumstances is one area that draws particular concern for ALTA.

“These alternative title products increase risks which are ultimately shifted to both lenders and consumers,” ALTA wrote. “Should a title issue arise on a property covered by an attorney opinion only, the buyer would need to prove negligence on the part of the attorney to pursue a claim. If negligence is not proven, a claimant would likely need to pay the legal costs involved to litigate the title matter. Additionally, consumers could be pushed into foreclosure, as that is a condition to make a claim under terms of alternative products currently in the market. By contrast, title insurance policies are backed by statutorily required financial reserves to cover future claims risks.”

In its comment letter, NAFCU offered praise to FHFA for developing the Office of Financial Technology and its recent efforts to promote and facilitate responsible innovation. It also called for FHFA to “remain consistent in the integration of financial technology for all of its regulated entities and coordinate with the other federal and state financial regulators as appropriate.”

NAFCU also pointed out many credit unions are already integrating with fintech to enhance different parts of the mortgage process. “Credit unions work with fintech companies to improve efficiency in the mortgage process and improve member service, when possible. Fintech systems can quickly process large amounts of data, thus introducing speed into the mortgage process. Credit unions’ collaboration with fintechs can make processing mortgage loans much faster than traditional methods, which can provide a huge advantage for borrowers who may be racing the clock, especially in times of lower interest rates and competitive housing sales.”

ICBA emphasized the need for robust industry engagement throughout this process. “[Industry participation] is vital when determining specific industry pain points and the fintech solutions that will hopefully alleviate them.”

The suggestions from ICBA included:

  • Develop solutions that improve and maintain community bank access to the secondary market.
  • Invest in fintech/regtech solutions that improve originating and closing processes.
  • Provide industry stakeholders with more clarity about how FHFA will conduct this fintech project.
  • FHFA should develop this project and consider potential fintech solutions with the assumption that the GSEs may one day exit conservatorship.
  • As seller/servicers, community banks should not be adversely impacted by being required to submit additional data points.

It is not entirely clear what FHFA’s next steps will be after gathering this information and suggestions from the public. However, there will likely be notable rule and policy changes through the Office of Financial Technology in the near future as fintech becomes an even greater force in the housing finance market.

Today's other top stories
House committee votes to slash CFPB funding through Dodd-Frank amendments
CFPB will not prioritize Sec. 1071 enforcement, supervision
Mortgage industry supports raising FHA loan limit to improve housing affordability
Banking agencies withdraw guidance on crypto-asset risk management
Financial services trades focus on digital assets, mortgage technology


COMMENT BOX DISCLAIMER:
October Research is not responsible for the comments posted on its websites by readers. We will do our best to remove comments that include profanity or personal attacks or other inappropriate comments.
Comments:

Be the first to leave a comment.

Leave your comment
Please enter a comment.
CAPTCHA Validation
CAPTCHA
Code:
Please enter the word displayed in the image above. Please enter the word displayed in the image above.
: 
Please enter your name.
: 
Please enter your email address.
This field must contain a valid email address.
Your Email is for reporting purposes only. It will NOT be displayed.
Popularity:
This article has been viewed 1990 times.

Monthly Newsletter

Dodd Frank Update May 2025

Cover Story:

Wolters Kluwer experts analyze shifts in banker compliance concerns


News by Topic   News by Edition   News by Agency   News by Industry   In-depth Reports   Events
Banking
Case Law
Conference Coverage
Consumer Protection
Data Privacy
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
 
Dodd Frank Update April 2025
Dodd Frank Update May 2025
Archives
 
CFPB NCUA
CFTC OCC
FDIC OFR
FHFA SEC
FRB States
FSOC Treasury
FTC  
 
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
 
2025 State of the Industry
CRA and Affordable Housing
2025 State of the Industry
Who's My Regulator?
Fair Lending
Mortgage Technology
Marketing Compliance for Lenders
Archives
 
National Settlement Services Summit (NS3)
Women's Leadership Summit (WLS)
Webinars

Library   About   Subscribe   Other Publications
Data Privacy Vault Court Actions
Keys to Real Estate podcast Enforcement Documents
Blog - Tuesdays with Mary Guidance Documents
1071 Compliance Guide White Papers
eClosing Solutions Showcase Position Papers
Executive Interview Series Legislation
Lender Associations Regulations
The Dodd-Frank Act Reports, Studies and Surveys
Dodd-Frank Summary & History Federal Register Notices
 
Dodd Frank Update
Contact / Editors
Advertise
Request a Media Kit
Social Media
Are You An Expert?
Subscriber Agreement
 
Subscriptions
Free Email Updates
Try a Free Edition
 
The Title Report
The Legal Description
Valuation Review
RESPA News
Copyright © 2011-2025 Dodd Frank Update
An October Research, LLC publication
3046 Brecksville Road, Suite D, Richfield, OH 44286
(330) 659-6101, All Rights Reserved
www.doddfrankupdate.com | Privacy Policy
VISIT OUR OTHER WEBSITES
> The Legal Description
> RESPA News
> The Title Report
> Valuation Review
> NS3 The Summit
> Women's Leadership Summit
> October Research, LLC
> The October Store


Loading... Loading...
Featuring:
  • Delivery 3X a week plus breaking news as it happens
  • Comprehensive title insurance industry news
  • Recent acquisitions, mergers, real estate stats
  • Exclusive in-depth coverage of the industry's hottest stories
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Comprehensive Dodd-Frank coverage
  • The latest information from the CFPB
  • Full coverage of Congressional hearings
  • Updates on all agency actions
  • Analysis of controversial provisions
  • Release of newest studies and reports
Sign up today and...
  • Be one of the first to know where NS3 is being held
  • Learn about NS3 speakers and sessions
  • Save on registration with Super-Early Bird rates
  • Discover the networking opportunities NS3 offers
  • Find out if CE credits will be offered for your area
  • And much more
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Preview the latest RESPAnews.com Top Story
  • RESPA related headline news
  • Quote of the Week
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Legal, regulatory and legislative information impacting the settlement services industry
  • News from HUD, Congress, state legislatures and other regulatory agencies
  • Follow the lobbying efforts of all the major national real estate services organizations.
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • The industry's only full-time newsroom
  • Relevant, up-to-date appraisal industry news
  • Covering the hottest stories and industry trends
NEWS BY TOPIC
EDITION
AGENCY
IN-DEPTH REPORTS
INDUSTRY
EVENTS
LIBRARY
EMAIL UPDATES
ABOUT
SUBSCRIBE
Banking
Case Law
Conference Coverage
Consumer Protection
Data Privacy
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
Current Edition
April 2025
March 2025
February 2025
Archives
CFPB
CFTC
FDIC
FHFA
FRB
FSOC
NCUA
OCC
OFR
SEC
States
Treasury
2025 State of the Industry
Real Estate Compliance Outlook
CRA and Affordable Housing report
Who's My Regulator?
Fair Lending
Marketing Compliance for Lenders
Archives
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
National Settlement
Services Summit (NS3)
Women's Leadership
Summit (WLS)
Webinars
CFPB's Shake-Up & Its Impact on You
2025 Economic Outlook Series
Data Privacy Compliance
Fintech Partner Compliance
Strategies post-NAR settlement
Industry and Regulatory Outlook
Securing Your Cyber Network
Compliant Marketing Tactics
2024 Economic Forecast Series
Webinar Archives
Data Privacy Vault
Keys to Real Estate podcast
Blog - Tuesdays with Mary
1071 Compliance Guide
eClosing Solutions Showcase
Executive Interview Series
Lender Associations
The Dodd-Frank Act
Dodd-Frank Summary
Court Actions
Enforcement Documents
Guidance Documents
White Papers
Position Papers
Legislation
Regulations
Reports, Studies and Surveys
Federal Register Notices
Proposals
Final Rules
GAO
Agency
Contact Us
Advertise
Request a Media Kit
Social Media
Are You An Expert?
Subscriber Agreement