The mortgage industry is 20 years behind on tech, FHFA director says

Federal Housing Finance Agency’s Director Sandra Thompson thinks that the mortgage industry is behind on technology adoption and that it “has to be better.” 

“I was just happy to be able to upload my documents during a refinance,” Thompson said Wednesday at DC Fintech Week. “You can now fill out a refinance form electronically and that’s a great revelation.”

“The mortgage industry generally is very reluctant to adopt technology… we are like 20 years behind,” she added. 

FHFA’s recent creation of an office of financial technology aims to address this problem and push the industry toward embracing cutting edge technologies. The new office is in the process of developing strategies for the entities the FHFA regulates — including Fannie Mae, Freddie Mac and the Federal Home Loan Banks — to advance housing finance fintech innovation in a responsible and equitable manner.

Currently, the FHFA is interested in learning how technology can be used to reduce the time and cost to close a loan, Thompson said.

“The average time to close is 45 days, while the average cost of closing runs around $9,500,” she said. “[The closing process] shouldn’t take that long, quite frankly.”

Younger borrowers, who can “sit right here, get a loan for a car, and probably have a car delivered before this conference is over” will not be satisfied with the current process of buying a home, Thompson said.”The process that we have now is not going to work very long for them because [younger generations] are used to the immediacy of things happening and we have to be more responsive and make the process easier to understand, and faster to get to closing,” she said. 

The many stakeholders participating in the origination process are a barrier for technological innovation in the mortgage industry, Thompson said.

“You’ve got underwriters, loan officers, Realtors, appraisers, title companies and even after the loan is closed and securitized, you’ve got investors,” said Thompson. “And so, you can come up with a technology, but are those participants going to adopt the technology and then have it utilized on a widespread basis?”

In July, the FHFA called on stakeholders to provide their feedback on the role of technology in housing finance. 

“We are not the experts, so we’ve asked the public what are places in the mortgage process where technology can be useful to cut costs, cut time or improve efficiency,” Thompson said. 

“We’re looking at the title process, e-closings, e-notifications, e-registration, but in order to make the big impact that we’d like to see, I think we’re gonna need to get more information from the people that do this every day.” 

Submissions are open to the industry until Oct. 16.