​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Recapping FHFA’s Inaugural TechSprint

From Monday, July 10 to Thursday, July 13, 2023, FHFA held its first-ever TechSprint. N​amed “Velocity,” the TechSprint brought together experts and practitioners from the technology and mortgage finance sectors to participate in a team-based, problem-solving event hosted by FHFA’s Office of Financial Technology.

The Challe​nge

The landscape of financial services is evolving rapidly, with consumers expecting faster​, more efficient, and transparent services. Yet, in an era where digital transformation has become the norm, the continued reliance on paper-driven processes in mortgage origination has become an increasingly cumbersome and costly problem. According to the Mortgage Bankers Association (MBA) Quarterly Performance Report, mortgage production costs have doubled over a ten-year period, increasing from approximately $5,300 in 2012 to $10,600 in 2022.1 While there are multiple factors that contribute to these rising costs, inefficiencies in the loan manufacturing processes are a key driver, impacting not only the lender’s operational costs and risk management but also the borrower’s experience.

Research suggests that lenders using digital solutions generally have lower costs and produce higher quality loans. A 2023 study by Freddie Mac found that lenders who use digital solutions at a high rate have 40 percent fewer loan defects than lenders with lower usage.2 The study also found that lenders with a higher usage of digital solutions originated loans that, on average, were about 14 percent, or $1,700, less costly per loan than lenders with a lower usage.3 Additionally, the use of digital solutions can help lenders process loans faster, which results in reductions to operating costs. Freddie Mac’s 2021 Cost to Originate Study found that mortgages with digital/technology offerings can produce up to 18 days of savings in closing cycle time.4 While digital solutions exist today, their adoption by the industry has significant room for growth, with at least 50 percent of mortgage lenders using paper in their mortgage origination processes.5​

Velocity TechSprint

FHFA’s Velocity TechSprint brought together innovators, regulators, and industry experts to broadly explore innovative, digital solutions that further promote efficiency and cost savings in mortgage origination processes. Over the four days, 80 participants from 60 companies were divided into 10 teams and tasked with a common challenge:

How might data digitization drive transparency and increase access, fairness, affordability, and sustainability in mortgage lending?

FHFA’s problem statements for the Velocity TechSprint invited participants to explore various aspects of data digitization and technology in mortgage lending. The statements were responsive to industry feedback coming from the Office of Financial Technology’s external outreach and the themes coming from public responses to FHFA’s Fintech in Housing Finance: Request for Information (RFI), issued in July 2022. The five focused problem statements explored:

• Expanded use of direct-to-source data approaches and automated verification processes in mortgage lending;
• Challenges with the adoption of existing digital mortgage tools;
• Ongoing importance of enhancing and harmonizing data standards in mortgage processes;
• Opportunities for the use of alternative data in credit underwriting; and
• ​Enhancing borrower access and preparation for a digital mortgage experience.

Opening Day

FHFA Director Sandra L. Thompson opened the Sprint by observing that “housing finance too often relies on paper-driven processes in today’s digital world. And it is hard to make progress on longstanding challenges when we continue to do things the same way we’ve always done them.” She urged the Sprinters to focus on developing concrete solutions that could obtain widespread adoption.

Director Thompson also introduced Opening Day keynote speaker, John Hope Bryant of Operation HOPE, who observed that the Sprinters were “sitting in a moment in history” and drew from his personal experiences to inspire the Sprinters to find solutions for those underserved by today’s housing finance system. He challenged the Sprinters to harness the latest developments in technology to responsibly and sustainably advance a more inclusive economy and meaningfully address the racial and ethnic disparities in homeownership.

Opening Day also featured a panel on the growing role of data science and emerging technology in mortgage finance. The panel was moderated by David Ehrich, Co-Founder and Executive Director, Alliance for Innovative Regulation (AIR) and included panelists from the finance and technology sectors: Michael Akinwumi, Chief Technology Officer at the National Fair Housing Alliance; Pete Carroll, Executive in Public Policy and Industry Relations at CoreLogic; Melissa Koide, CEO at FinRegLab; and Joanna Smith Ramani, Co-Executive Director at the Aspen Institute Financial Security Program.

You can watch Opening Day of the Velocity TechSprint here:

Beginning Monday just before lunch and continuing through the end of the day on Wednesday, the Sprint teams developed ideas for how they would propose to solve their selected problem statement(s). During this three-day stretch, the TechSprint teams and their ideation activities were supported by FHFA’s Office of Financial Technology, FHFA experts on housing policy and supervision, and data and technology experts from Fannie Mae, Freddie Mac, and the Mortgage Industry Standards Maintenance Organization (MISMO).​

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Observer Track Panel Discussions

From the afternoon of Opening Day through the final day of the TechSprint, the Observer Track convened panelists from across the finance and technology sectors to debate and explore the tough issues underlying the TechSprint’s activities. The Observer Track was organized to support broader public engagement in the TechSprint and to amplify awareness of the challenges and opportunities associated with data digitization in mortgage lending.

The Observer Track panels featured a diversity of perspectives on the current and future state of data and technology in the mortgage industry. The panels explored topics such as balancing data-driven decision-making with data privacy and security, recent developments in the use of data and technology by lenders, enhancing customer experience through technology, the role of fintech in financial inclusion and the use of alternative data sources, and navigating regulatory expectations on the use of financial technology.​

The panels can be viewed here:

​Demo Day

The TechSprint culminated with Demo Day, which featured expert speakers and demonstrations from the 10 teams of their proposed solutions to the problem statements. Demo Day also included:

• ​​O​pen​ing remarks from FHFA’s Division of Conservatorship Oversight and Readiness Deputy Director Jason Cave;
• A fireside chat on the prospects of fintech for borrowers between Lisa Rice, President and CEO of the National Fair Housing Alliance, and Delicia Hand, Director of Financial Fairness Advocacy at Consumer Reports, moderated by Jo Ann Barefoot, CEO and Co-Founder of AIR; and
• A convening of innovation office leaders from federal financial regulators to explore the financial regulators’ perspectives on technology and innovation under their supervision. The panel featured: Ann Epstein, Assistant Director of the Office of Competition and Innovation at the Consumer Financial Protection Bureau; Grovetta Gardineer, Senior Deputy Comptroller of Bank Supervision Policy at the Office of the Comptroller of the Currency; Sunayna Tuteja, Chief Innovation Officer for the Federal Reserve System; and moderated by Anne Marie Pippin, Associate Director of FHFA’s Office of Financial Technology.

The headline event of Demo Day was the five-minute presentation from each team before an independent panel of six judges and a sizeable audience of in-person and virtual attendees. The panel of six judges included: Chris Brummer, Professor at the Georgetown University Law Center; David Coleman, President of MISMO; Delicia Hand, Director of Financial Fairness Advocacy at Consumer Reports; Melissa Koide, CEO of FinRegLab; Steve Majerus, CEO of Synergy One; and Faith Schwartz, Founder and CEO of Housing Finance Strategies.

 

​The Sprint teams showcased cutting-edge technologies like artificial intelligence (AI), blockchain, and data analytics to reduce inefficiency and unlock a more transparent and accessible mortgage process. In addition to featuring the potential uses of emerging technology in mortgages, the team presentations explored themes, such as:

• Growing lender and borrower awareness and adoption of existing digital tools and resources;
• Centralization of financial education resources to better equip potential homebuyers to navigate the mortgage process;
• Consumer desire for ownership and portability of their financial data across lending institutions;
• Opportunities to address the challenges associated with data trust within the mortgage ecosystem and the multiple data verification processes that occur during mortgage origination; and
• Opportunities for private and public sector partnerships to better coordinate the exchange of data during the mortgage origination process.

After deliberations by the judges, and an audience poll for the Crowd Favorite selection, recognitions in four categories were presented to three teams:

• Team FINnovation: the Jump recognition for biggest potential impact, and Crowd Favorite recognition for their “industry cooperative utility that houses consumer-owned data and automates all upfront verifications.” The utility could house consumer-owned data that could be tracked and accessed easily by the consumer. The utility would connect directly to consumer data sources and provide consumers with the ability to control the sharing of their data with lenders and other participants in the mortgage process.
• Team Home4All: the Eureka recognition for most creative, for their “home.gov” portal that could centralize information about mortgage products and requirements to help potential borrowers build credit and connect with lenders. Home.gov would provide customized financial education services to prospective homebuyers using a combination of chatbots and secure alternative data sources to help direct the consumer through the process of purchasing a home.
• Team U-Turn 180: the Fast recognition for quickest to market, for their “No-to-Yes” tool that could help prospective homebuyers whose mortgage applications were declined to build their credit and “get to yes.” The No-to-Yes tool could identify the reason(s) for a denial and recommend personalized remediation solutions to the prospective homebuyer. The tool would rely on data provided by housing counselors and lenders and offer resources to help prospective homebuyers act on a remediation recommendation and enable them to track their progress.

The entirety of the Velocity TechSprint Demo Day, including team presentations and the announcement of recognized teams, can be viewed here:

​What's Next

Thank you to all of the participants, volunteers, and audience who helped make FHFA’s inaugural TechSprint a success.

FHFA’s Office of Financial Technology looks forward to maintaining the momentum from the Sprint and will continue to engage with stakeholders on how fintech and innovation can be used to improve borrower experiences within the mortgage process by reducing barriers, increasing efficiencies, and lowering costs. We are continuing to explore the big ideas and key themes from the Sprint through an analysis of their desirability, viability, and feasibility, and their potential impacts on the broader mortgage ecosystem. Look for a summary of our post-TechSprint activities in the coming months.

In the meantime, feel free to tap us on the shoulder at the next conference and ask how we’re harnessing the innovative ideas from the TechSprint to unlock a more transparent, efficient, and accessible mortgage process.

​Velocity TechSprint Recap Video

Interested in learning about the TechSprint in a few minutes? This video recaps FHFA’s first-ever TechSprint and provides insights from FHFA’s Jason Cave, Deputy Director of the Division of Conservatorship Oversight and Readiness, and Anne Marie Pippin, Associate Director of the Office of Financial Technology, on the objectives of the Sprint.

​Find Out More

For further information, please visit FHFA’s Financial Technology page. You can also contact the FHFA Office of Financial Technology at fintech@fhfa.gov.

** ​External links to n​on-federal agency websites are not endorsed by the federal government and are not subject to federal information quality,
​ ​privacy, security, and related guidelines.

1 Fr​eddie Mac, Digital Innovation Drives Loan Quality (February 2023).

2 Ibid.

3 Ibid.

4 Freddie Mac, Cost to Originate Study: How Digital Offerings Impact Loan Production Costs (November 2021).

5 Infosys, Accelerating Digital Transformation in the Heated Mortgage Industry (2021).