On July 18, 2022, the Federal Housing Finance Agency (FHFA) signaled its focus on the fintech industry with two actions that add FHFA as yet another regulator focused on the effects of tech companies in their jurisdictions.
First, the agency announced the creation of an Office of Financial Technology, the purpose of which is to “address[] emerging risks and advance[] agency priorities related to the adoption and deployment of financial technology.” Referred to as the “Fintech Office,” this new office initially will be engaging with external stakeholders, including “market participants, industry, non-profits, consumer groups, and academia,” “to facilitate the sharing of best practices.” The Fintech Office’s website indicates that its initial leadership team consists of three current personnel, the most senior of which is a three-decade FDIC veteran who currently is the office’s Deputy Director of Conservatorship Oversight and Readiness. FHFA explained that, once established, the Fintech Office will:
Second, FHFA issued a request for information (RFI) on the role of fintech in the mortgage industry. The document begins with an overview of fintech’s growing role at every node of the mortgage ecosystem, noting that fintechs have been “most active in the loan origination and underwriting space,” capitalizing on consumers’ desire for low-cost, digital alternatives to traditional mortgage origination. FHFA’s overview reflects a mixed approach to fintech—recognizing the many potential benefits but cautious regarding the effects of certain innovations, such as the use of artificial intelligence in underwriting and credit decisions. The RFI’s questions focus on six areas:
What does this mean? As the conservator and regulator for Fannie Mae and Freddie Mac, FHFA’s views on fintech firms could play a large role in the future of fintechs in the mortgage industry. Indeed, Fannie and Freddie themselves already leverage technology for their operations (often partnering with fintechs) through products such as Freddie’s Asset and Income Modeler and Fannie’s Day 1 Certainty program. Further engagement with FHFA could provide additional business opportunities to new entrants and help current participants allay whatever concerns may have prompted FHFA’s RFI. So fintechs and industry groups should seriously consider whether and how to take up FHFA on its offer to engage on the issues the agency is wrestling with.
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